UK to strengthen rules on ‘misleading’ cryptocurrency ads
But changes ‘won’t stop the outright scams that have exploded off the back of Bitcoin’
The UK government has published plans to bolster the rules on cryptoasset advertisements and protect consumers from “misleading claims”.
It aims to bring crypto ads in line with with other financial advertising, ensuring they are “fair and clear”.
This means the promotion of qualifying cryptoassets will be subject to Financial Conduct Authority (FCA) rules in line with the same standards that other financial promotions such as stocks, shares, and insurance products are held to.
The UK government said that these changes will “balance the desire to encourage innovation with the need to ensure that cryptoasset advertisements are fair, clear, and not misleading”.
This comes after research found that around 2.3 million people in the UK are now thought to own a cryptoasset, but the understanding of crypto is declining, suggesting that some users may not fully realise what they are buying.
The government said the decision to bring crypto advertisements into the scope of regulation will “mitigate the risks of consumer harm, ensuring people have the appropriate information to make informed investment decisions”.
The change will be made via secondary legislation to amend the Financial Promotion Order, which sets out the investments and activities to which the regime applies.
Under the Financial Services and Markets Act 2000, a business cannot promote a financial product unless they are authorised by the FCA or the Prudential Regulation Authority (PRA), or the content of the promotion is approved by a firm which is.
Firms that wish to market these investments and activities must comply with binding rules that financial promotions must be fair, clear, and not misleading.
The changes will provide the FCA with the “appropriate powers to regulate the market more effectively”, the government said.
The regulator will shortly start a consultation on its proposed financial promotions rules that will apply to cryptoassets.
Rishi Sunak, chancellor of the exchequer, said on 18 January 2022: “Cryptoassets can provide exciting new opportunities, offering people new ways to transact and invest – but it’s important that consumers are not being sold products with misleading claims.
“We are ensuring consumers are protected, while also supporting innovation of the cryptoasset market.”
Laura Suter, head of personal finance at AJ Bell, added: “The UK has followed in the footsteps of Spain and Singapore in cracking down on cryptocurrency advertising, with new rules bringing the adverts in line with other financial promotions.
“You only have to glance through a few cryptocurrency adverts to see that many overstate the potential returns on offer and fail to clearly lay out how much risk individuals will be taking.
“The Advertising Standards Agency has already been banning individual crypto adverts that it deems misleading or understating the risk involved in the market, but this new move by the government will lead to a wholesale tightening of the rules governing adverts.
“While the move will help some people, it won’t stop the outright scams that have exploded off the back of Bitcoin and other cryptos soaring in price. What would have a far bigger impact is cracking down on social media accounts where people claim to have made their millions from buying Bitcoin, most of which are ultimately scams or glorified pyramid schemes.”