With the recent surge in the number of crypto ads surfacing every day, the UK government has decided to strengthen the rules overseeing crypto-asset adverts and protect investors from "misleading" claims.
In a consultation response published by the Treasury on Tuesday, the government intends to bring crypto ads under the scope of financial promotions legislation.
Earlier in 2020, the UK government had begun consulting on a proposed framework for regulating crypto ads.
Per the report, while there is substantial growth in the number of citizens who have crypto assets in their portfolios, about 2.3 million people, there is a major decline in their understanding of what they are really getting into, suggesting that they are being misled by ads encouraging them to buy crypto and other related products.
Therefore, the government's latest move to impose strict rules on crypto ads will help to mitigate the risks of consumer harm and ensure that consumers have adequate information to make informed investment decisions.
FCA to Get More Authority Over Crypto Ads
The proposed legislation will reportedly provide the UK financial regulator, the Financial Conduct Authority (FCA) with the authority to efficiently regulate crypto ads.
"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."
Therefore, the promotion of all qualified crypto assets will now be subject to the FCA's regulations with the same high standards as the promotion of other financial instruments, including stocks, shares, and insurance products.
The rules will improve consumer protection and at the same time encourage innovation, the statement noted.
Misleading Crypto Ads on the Increase
With the recent cryptocurrency boom, crypto ads have increasingly been spotted on several websites, social media posts, popular billboards, and tubs in London.
In one instance, memecoin Floki Inu promoters took to London Underground subways and buses to "aggressively" promote the coin.
The Advertising Services Agency (ASA) has since imposed several stringent rules on crypto ads, banned a countless number of them, and warned several crypto and non-crypto firms about crypto promotions.
The ASA had banned ads from eToro, Coinbase, Papa John's, Luno, Kraken, and even Arsenal's sports fan token ads for being "irresponsible".
Speaking on the latest move, 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 the innovation of the crypto-asset market."
Additionally, the government plans to schedule a transitional period of about six months from the finalization and publication of the proposed Financial Promotion Order regime and the complementary FCA rules.
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