The UK government published plans to strengthen the rules on crypto advertisements and protect consumers from misleading claims today. At the moment, an estimated 2.3 million people in the UK own a crypto asset and their popularity is on the rise.
Research suggests that not all users fully understand what they are buying when buying crypto, however, which poses the risk of fraud.
Promotion of assets subject to FCA rules
Promotion of qualifying crypto assets will be in line with rules formulated by the UK finance regular, – the Financial Conduct Authority. Crypto assets will have to meet the same standards that assets like shares and stocks must meet.
Rishi Sunak, Chancellor of the Exchequer, 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“.
Cryptoasset Taskforce steers UK regulatory response to market
In 2018, the government launched the so-called Cryptoasset Taskforce, which still supervises the regulatory response to the crypto asset market.
They remain eager to support innovation in the market and are aware of the potential benefits of stablecoins and other products, which can ensure a more efficient means of payment.
Mitigating the risk of harm
The government’s decision to step up regulation of these types of advertisements is aimed at mitigating the risks of consumer harm, making sure people are reasonably informed and can make the best possible investment decisions.
Compliance with binding rules
Companies that want to promote such investments and related activities have to comply with binding rules, namely that the promotions are clear and fair. The Financial Promotion Order, which sets out the investments, trading, and other activities that the financial promotion regime applies to, will be amended.
Under the Act on Financial Services and Markets, adopted in 2000, a firm may only promote a financial product with the authorization of the FCA or the PRA. This grants the Financial Conduct Authority the relevant powers to regulate the market more effectively.
6-month transitional period for finalization
The government will establish a suitable transitional period (around half a year) from finalizing and publishing the proposed Financial Promotion Order regime and the complementary FCA rules. Once Parliament makes time, the legislation will move forward.
The announcement of today supplements wider proposals on crypto assets and stablecoins set forth by a regulatory stablecoin framework last year. The government will announce next steps in due course.