The UK government plans on including cryptocurrency ads under the same financial promotion rules as stocks, shares and insurance products.
The government’s consultation response on cryptocurrency regulation was published yesterday and set out the scope of financial promotion legislation which would soon apply to “qualifying cryptoassets”.
This would mean they come under Financial Conduct Authority (FCA) rules like other popular financial products.
The consultation was based on findings from a report in 2018 from the Cryptoassets Taskforce, which is made up of the HM Treasury, the Bank of England and the FCA.
This report discovered “misleading advertising” combined with a lack of available or appropriate information on cryptocurrency was a “key consumer protection issue”.
It also found this advertising often targeted retail investors but did not reveal accurate benefits and volatility risks, namely making it clear that crypto consumers can grow or lose their investment.
A concern voiced by the FCA in the government consultation was that cryptoasset ownership has continued to grow, around 2.3 million people in the UK are now thought to own some sort of crypto, while levels of understanding have declined so more people that are investing in this type of currency do not fully understand the risks involved where they could lose investments.
The government plans to expand the scope of the Financial Promotion Order with secondary legislation to address this issue with “misleading” crypto advertising.
Chancellor of the Exchequer, 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.”