UK Treasury to Crack Down on ‘Misleading’ Crypto Promotions
Crypto firms will face tougher advertising rules under plans set out by the UK Treasury to bolster consumer protections in the fast-growing digital asset industry, as global regulators tighten the screws on how whose tokens are promoted.
In a statement on Tuesday, UK Chancellor Rishi Sunak said crypto assets could offer people new ways to transact and invest “but it’s important that consumers don’t see themselves selling products with misleading claims”.
The government has said it will seek to change the law to give the Financial Conduct Authority oversight of most cryptocurrency promotions “to the same high standards as other financial promotions such as shares, stocks and shares.” insurance products”.
The major change in UK policy comes after Spain this week imposed restrictions on the promotion of cryptocurrencies, while the Italian regulator warned of the risks for consumers with little knowledge of finance. Singapore’s watchdog has also joined other major financial regulators in the crackdown and this week banned advertisements on public transport and via social media influencers.
Advertising for crypto tokens and exchanges has widely proliferated in the rise in crypto prices during the pandemic. Last year, the UK market regulator estimated that 2.3 million people in the country owned crypto assets.
Crypto advertisements on London’s public transport have drawn particular attention.
The new rules, set by the Treasury on Tuesday following a consultation process that began in 2020, will place crypto advertisements within the scope of existing financial promotions legislation, which states that “financial promotions must be fair, clear and not misleading”. .
Under these rules, financial advertisements must come from a company authorized by the FCA or the Prudential Regulation Authority, or else be pre-approved by an authorized company.
“I suspect that many crypto providers will find it difficult to advertise their products in the future, as I believe that FCA-licensed firms will not want or be able to endorse crypto-related financial promotions. “said Jonathan Master, partner at law firm Eversheds Sutherland. “What FCA approved company is going to put their head above the parapet?
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Dan Moczulski, UK managing director of eToro, which has diversified into crypto alongside stock trading, said the new rules would help level the playing field.
“It will mean that offshore suppliers will have to follow the same regulations as everyone else,” he said.
Until now, responsibility for crypto advertisements has largely fallen to the Advertising Standards Authority. The addition of FCA oversight represents a significant tightening of the rules, since the ASA’s powers are generally limited to investigating advertisements after the fact rather than requiring pre-approval. The FCA can also impose fines on companies for serious breaches of its standards.
“We welcome the changes proposed by the Treasury today and are reviewing our approach to regulating crypto-asset promotions,” the FCA said in a statement. “We continue to raise awareness of the risks of investing in crypto-assets and have warned consumers that if they invest, they must be prepared to lose all their money.”
Several London politicians have called for a ban on crypto ads on public transport after ‘memecoin’ Floki Inu, named after Elon Musk’s dog, launched an advertising blitz last year on subways and public transport. British capital bus. Floki Inu has declined to publicly identify the people or companies that have backed his token.
Last month, the ASA reprimanded seven crypto groups for a wide range of promotions, including online campaigns and the use of social media influencers, saying “something has to change quickly in the space in line”.
The government also said that in some cases crypto lending and decentralized finance projects could be affected by the new rules, while planning to expand the reference to blockchain technology to give it more flexibility in the future.
It will take at least several months for the new rules to come into effect. The government has said it will introduce the new legislation “once parliamentary time permits” and provide for a transition period of around six months once the rules are in place.