The government has published details of its plans to strengthen the rules on crypto asset advertisements and to protect consumers from misleading claims.
Around 2.3 million people in the UK are now thought to own a crypto asset with their popularity rising – but research suggests that understanding of what crypto actually is is declining, suggesting that some users may not fully understand what they are buying. This poses a risk that these products could be mis-sold.
The government plans to bring the promotion of crypto assets within the scope of financial promotions legislation, meaning that the promotion of qualifying crypto assets will be subject to FCA rules in line with other financial promotions such as stocks, shares, and insurance products. Hopefully this will achieve a balance between the desire to encourage innovation with the need to ensure that crypto asset advertisements are fair, clear, and not misleading.
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.
We are ensuring consumers are protected, while also supporting innovation of the crypto asset market.
The government wants to support crypto asset innovation and understands that there is a potential benefit to be derived from products like stablecoins including providing a more efficient means of payment. However, research undertaken by the FCA has highlighted the potential for misleading advertising of crypto products to cause consumer harm.
It is likely that this will be achieved through secondary legislation intended 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 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.