The UK government tightens grip on misleading crypto promotions
By Puja Sharma
This decision of the UK government to regulate these types of advertisements will reduce the chances of consumer harm, ensuring people make an informed decision about their investment.
Approximately 2.3 million people in the UK own a crypto asset with their popularity rising. However, research finds that understanding of what crypto is is declining, suggesting that some users are not fully aware of what they are buying. This increases the likelihood that these products could be mis-sold.
The UK government responded to the consultation with its plan to bring the promotion of crypto assets within the scope of financial promotion legislation. Therefore, promoting crypto assets will be subject to FCA rules in line with the high standards applied to other financial promotions such as stocks, shares, and insurance products. This measure will ensure fair, clear, and non-misleading crypto-asset advertisements by:
- Fostering innovation while protecting consumers
- Introducing legislation to address misleading cryptocurrency promotions
- Bringing adverts in line with other financial advertising, ensuring they are fair and clear
The UK government support crypto-asset innovation and acknowledges that stablecoins may provide a more efficient system of payments, which is why, in 2018, the government launched the Cryptoasset Taskforce, which is steering the government’s regulatory approach to crypto-assets. The FCA’s research, however, revealed the potential for misleading advertising of crypto products to harm consumers. By bringing these advertisements under regulation, the government will mitigate the risks of consumer harm and ensure people have the right information to make informed investments.
This proposed change in legislation comes after repeated warnings from the Financial Conduct Authority that consumers could lose all their money if they succumb to the promises of fast and high returns. News of the rule changes comes at a timely moment, given that the value of Bitcoin has dropped by 38% since its all-time high of over $68,000 in November, slipping back around 1% to $41,850 today.
“The Advertising Standards Authority has been valiantly trying to bat against the pace bowler onslaught of complaints about misleading crypto promotions, but it’s been needing another teammate given the scale of the problem. Bringing the Financial Conduct Authority onto the pitch, with crypto ads brought under existing rules governing financial promotions, will beef up the defense of consumers against a barrage of crypto ads promising fast and easy returns,” said Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown.
“It will come as a relief for the ASA, which could only censure firms after the ads had been posted and may have already ensnared vulnerable investors. It’s not just obscure crypto trading exchanges that have seen ads banned, even Arsenal Football Club has been censured for promoting risky assets like tokens to fans without enough warnings attached. With the FOMO effect so strong, far too many financially vulnerable consumers have been at risk of getting their fingers seriously burnt, given the high volatility of the coins and tokens,” Streeter added.
Once this new legislation is passed firms promoting crypto products will have a much higher bar to jump to show that ads are fair, clear, and not misleading and companies could face hefty fines for serious breaches. Already it’s estimated that 2.3 million people in the UK owned some form of crypto asset in 2021 and there is growing concern at the heart of government and regulatory bodies about the increased speculation surrounding cryptocurrencies.
The roller coaster ride is set to continue given that crypto assets are also highly sensitive to the fortunes of the stock market and were propelled higher in an era of ultra-cheap money. As speculation swirls about how rapidly central banks will tighten mass bond-buying programs and start raising interest rates, given soaring inflation, they are likely to stay volatile.
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