The UK government is preparing to impose tighter rules on cryptocurrency advertising and promotions, a move that could affect investors who are unaware of the risks associated with crypto-assets.
The UK government has announced plans to increase scrutiny of what it calls “misleading and inadequate promotions” that could put retail investors at risk.
The proposals, published on the government website on Monday 20 July, would require all crypto firms to pass a regulatory gateway before they are allowed to promote their products. The scheme would place responsibility for overseeing crypto-asset promotions with the Financial Conduct Authority (FCA).
If adopted, the new rules would apply to all authorised firms operating in the crypto sector, who would need to ensure their marketing complies with the gateway’s requirements before publishing promotions.
The measures follow a 2018 report from the government’s Crypto Assets Taskforce, which identified misleading promotions and advertising for crypto-related products as a major investor protection concern.
John Glen, Economic Secretary to the Treasury and Minister for the City, said current regulation has not kept pace with the growing range of products on the market.
“If unauthorised firms produce misleading adverts, or fail to set out the risks clearly, people can end up losing money. That is why we want to increase protections around these financial promotions, including adverts for crypto-assets, while ensuring people still have access to a broad range of products in the market,” he explained.
Glen added that the proposals would bring advertising for crypto products into line with promotional standards applied to other asset classes.
The consultation on the proposal is open until 25 October. Last month the FCA published a report titled “Crypto Asset Consumer Research 2020,” which found a statistically significant rise in the number of people holding or who had held crypto-assets, from around 1.5 million to 2.6 million.
The FCA estimates that 5.35% of the general population has held or currently holds cryptocurrencies, up from 3% in the previous survey, which had a smaller in-person sample.
Awareness has also increased: the share of people who had never heard of cryptocurrencies fell from 58% to 27%. The report notes a rise in awareness from 42% to 73% of adults.
Survey participants identified Bitcoin as the best-known cryptocurrency, followed by Bitcoin Cash, Ethereum, Bitcoin SV and Litecoin. A majority of respondents (77%) said they bought cryptocurrencies through online exchanges, with the five most used platforms cited as Coinbase, Binance, Kraken, Bittrex and Bitfinex.
Translated by Carolane de Palmas