Treasury announces plans to strengthen crypto advertisement rules

New plans to strengthen the rules around crypto advertisements and protect consumers from misleading claims have been published by the Treasury.

The government is planning to legislate to address misleading cryptoasset promotions, with adverts to be brought into line with other financial advertising.

Around 2.3 million people in the UK are now thought to own a cryptoasset although research suggests that understanding among consumers around crypto is declining, indicating that some users may not fully understand what they are buying – posing a risk that these products could be mis-sold.

A government consultation response, published today, has set out a plan to bring the promotion of cryptoassets within the scope of financial promotions legislation. This means the promotion of qualifying cryptoassets will be subject to FCA rules in line with the same standards that other financial promotions – such as stocks, shares, and insurance products – are held to.

Chancellor, Rishi Sunak, said: “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.”

The government confirmed that bringing these types of advertisements into the scope of regulation will be done via secondary legislation to amend the Financial Promotion Order, which sets out the investments and activities to which the financial promotion 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 PRA, or if the content of the promotion is approved by a firm which is. Firms that wish to promote such investments and activities must comply with binding rules that financial promotions must be fair, clear, and not misleading.

The government believes this will provide the FCA with the appropriate powers to regulate the market more effectively.

Commenting on the Treasury’s plans, Hargreaves Lansdown senior investment and markets analyst Susannah Streeter, added: “Bringing the FCA onto the pitch, with crypto ads brought under existing rules governing financial promotions, it will beef up the defence of consumers against a barrage of crypto ads promising fast and easy returns.

“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.

“This proposed change in legislation comes after repeated warnings from the FCA that consumers could lose all their money if they succumb to the promises of fast and high returns.

“The rollercoaster 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 programmes and start raising interest rates, given soaring inflation, they are likely to stay volatile.”

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