Firms need to improve compliance with the marketing rules to avoid FCA action, it said.

In a review of the sector it recently took over regulating, the FCA said its rules were not always being followed.

It recently reviewed several crypto firms’ compliance with financial promotion rules designed to help people better understand the risks of investing in crypto.

The review analysed how firms were implementing personalised risk warnings, the 24-hour cooling off period, client categorisation and appropriateness assessments.

It found some examples of firms demonstrating good practice, which it has shared to help firms improve their compliance with the rules.

But it also found “multiple instances” where firms did not meet the required standards, it said.

Where it has identified concerns, it has worked with individual firms to help them make significant improvements but more work needs to be done to improve compliance, it said.

In its review it said: “We have seen firms relying on industry comparisons to benchmark what is acceptable. Given the levels of poor practice in the market, firms should not be doing this. Instead, we expect firms to engage with us directly to drive up standards across the sector.

“All firms communicating or approving financial promotions must make sure they have strong systems and controls for compliance in place. If firms do not improve, we will act. We will also consider firms’ compliance with regulatory requirements, including the financial promotions regime, as part of any application to be authorised under the future financial services regulatory regime for cryptoassets.”

The regulator has urged firms to read its 'good and poor practice' examples and previously published guidance GC23/1.