What You Can and Cannot Do
The legal boundary between education and advice, financial promotions rules, and the full list of UK governing bodies and regulations.
What You Can and Cannot Do
This module covers the legal boundaries for crypto platforms, the financial promotions regime, and the full regulatory landscape. It's essential reading for anyone building or using a crypto-related platform in the UK.
Part 1: What Platforms Cannot Do
Under UK law, an unauthorised platform (one without FCA authorisation) must not:
1. Provide Financial Advice (Article 53, RAO 2001)
"Advising on investments" is a regulated activity. It covers advice that:
- Is given to a person in their capacity as an investor; AND
- Concerns the merits of buying, selling, subscribing for, or underwriting a particular investment.
Examples of prohibited activities:
| Prohibited | Example |
|---|---|
| Recommend a specific crypto asset | "You should buy ETH" |
| Recommend a specific DeFi protocol | "You should deposit into Aave" |
| Recommend a specific investment action | "You should sell your Bitcoin now" |
| Make a personal recommendation | "Given your portfolio, you should…" |
| Recommend timing of transactions | "Now is a good time to buy" |
2. Make a Personal Recommendation (Article 53(1), MiFID II)
A personal recommendation is one that:
- Is made to a specific person (not generic)
- Is presented as suitable for that person OR based on their circumstances
- Recommends them to buy, sell, hold, or exercise rights on a particular investment
3. Issue Financial Promotions (Section 21, FSMA 2000)
Section 21 prohibits any person from communicating an invitation or inducement to engage in investment activity, unless:
- The content is approved by an FCA authorised person, OR
- An exemption applies under the Financial Promotion Order 2005
Breach of s.21 FSMA is a criminal offence: up to 2 years imprisonment, unlimited fines, or both.
4. Facilitate Crypto Exchanges or Trading
Routing trades through AMMs, DEXs, or CEXs — even as a middleman — requires FCA registration.
Part 2: What Platforms CAN Do
The following activities are permitted without FCA authorisation:
| Activity | Why It's Allowed | Boundary |
|---|---|---|
| Display crypto prices | Publicly available information | Must not present as a recommendation |
| Track portfolios | Information service | Must not suggest rebalancing |
| Calculate tax obligations | Computational tool | Must include "not tax advice" disclaimer |
| Provide general education | Generic information | Must not tailor to individual circumstances |
| Show DeFi yield rates | Publicly available information | Must not recommend specific protocols |
| Show comparisons | Factual comparison | Must not say "therefore use X" |
| Explain HMRC rules | Public information, properly cited | Present as education, not advice |
The Critical Distinction: Generic Information vs Personal Recommendation
Per FCA PERG 8 Annex 1:
NOT regulated advice (permitted):
- "ISAs allow tax-free growth on investments up to £20,000 per year."
- "HMRC treats crypto-to-crypto swaps as disposals for CGT purposes."
- "Aave V3 currently offers 3.2% APY on USDC deposits."
IS regulated advice (prohibited):
- "You should move your savings into an ISA."
- "Based on your holdings, you should deposit into Aave."
- "You should sell your ETH before the price drops."
Part 3: UK Governing Bodies & Key Legislation
Regulatory Bodies
| Body | Relevance |
|---|---|
| FCA (Financial Conduct Authority) | Crypto promotions, financial advice prohibition, Consumer Duty |
| HMRC (HM Revenue & Customs) | Crypto tax rules, Self Assessment, exchange data requests |
| ICO (Information Commissioner's Office) | GDPR/UK GDPR, user data handling, breach notification |
| ASA (Advertising Standards Authority) | Marketing claims must be truthful, defers to FCA on crypto ads |
| CMA (Competition & Markets Authority) | Consumer Rights Act 2015, unfair terms, misleading practices |
| Companies House | Company filing obligations |
| NCA (National Crime Agency) | Suspicious activity reporting (if FCA-registered) |
Key Legislation
| Statute | Relevance |
|---|---|
| FSMA 2000 | Overarching framework: regulated activities, financial promotion |
| RAO 2001 | Defines what requires FCA authorisation (Article 53: advising) |
| Financial Promotion Order 2005 | Exemptions from s.21 FSMA |
| MLR 2017 | AML/KYC obligations for crypto businesses |
| UK GDPR | Data protection for user financial data |
| Consumer Rights Act 2015 | Unfair terms, digital content quality |
| TCGA 1992 | CGT rules for crypto disposals |
| ITTOIA 2005 | Income tax on staking, mining, lending income |
| TMA 1970 | Self Assessment obligations, record-keeping |
| Finance Act 2011, Sch 23 | HMRC data-gathering powers from exchanges |
Financial Promotions Since October 2023
Since 8 October 2023, crypto asset financial promotions fall under FCA regulation. A crypto promotion can only be lawfully communicated through one of four routes:
- By an FCA authorised person
- Approved by an FCA authorised person
- By an FCA-registered cryptoasset business
- Exempt under the Financial Promotion Order 2005
Educational content about crypto is NOT a financial promotion. Displaying portfolio values and tax calculations is NOT a financial promotion. But affiliate links to exchanges may constitute a financial promotion if presented as an inducement.
Required Risk Warnings
Where content could be perceived as promotional, the FCA requires:
- A prominent risk warning: "Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong."
- A 24-hour cooling-off period for first-time investors (not applicable to information services)
- No inducements to invest (e.g. no "sign-up bonuses" for connecting exchange accounts)
RAO 2001, Article 53 — Advising on investments.
FSMA 2000, s.21 — Restrictions on financial promotion.
FCA PERG 8 Annex 1 — Examples of what is and is not advice.
FCA PS23/6 — Financial promotion rules for cryptoassets.
FCA FG23/3 — Finalised guidance on cryptoasset financial promotions.
Explain Like I'm 5
There are strict rules about what coin-related apps and websites can and cannot say. They can show you prices, help you keep track of your coins, and teach you how things work. But they are not allowed to say things like 'you should buy this coin' or 'sell that coin now.' That would be like a teacher telling you which sweets to buy at the shop, and only specially approved grown-ups are allowed to do that.
Key Takeaways
- Platforms cannot provide personalised investment advice, recommend specific assets, or facilitate trading without FCA authorisation.
- Platforms CAN display prices, track portfolios, calculate tax, and provide general education.
- The line is between generic information (allowed) and personal recommendations (prohibited).
- Breach of s.21 FSMA (unauthorised financial promotions) is a criminal offence with up to 2 years imprisonment.
- Since October 2023, crypto financial promotions must go through one of four lawful routes.
Educational only - not financial advice