The UK government is working on tighter rules to regulate cryptocurrency advertisements, the Finance Ministry and Financial Conduct Authority (FCA) have announced. The government will amend the existing laws on financial advertising to include crypto ads.
“[Crypto] adverts will be brought into line with other financial advertising, ensuring they are fair and clear. New rules will increase consumer protection while encouraging innovation,” the Finance Ministry stated in its official report regarding the new legislation, published on GOV.UK on Tuesday.
In the report, the ministry warned that cryptocurrencies are currently not regulated, and that people investing in them should be prepared to lose all their money, which must be made clear in the relative ads.
“Crypto assets 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,” Finance Minister Rishi Sunak was quoted in the report as saying.
The FCA, which regulates financial institutions, said on Wednesday the legislation for cryptocurrency ads is to be ready by the summer. The FCA’s draft rules include categorizing crypto assets as “Restricted Mass Market Investments,” which means that only “high net worth or sophisticated investors” would be able to respond to crypto promotions. The FCA also plans to ban crypto-related firms from using incentives such as refer-a-friend and new-joiner rewards in their ads.
Under the UK’s existing financial advertising regulations, “a business cannot promote a financial product unless they are authorized by the FCA or the PRA (Prudential Regulation Authority at the Bank of England).” The rules also state that all financial promotions must be fair, clear, and not misleading.
Crypto-related promotions have been flooding London’s underground rail network and its buses over the past few months. Some of the ads praised cryptocurrencies as an investment, while failing to highlight the risks they pose. The UK’s Advertising Standards Authority (ASA) had to step in after commuters filed complaints. The regulator banned several ads from crypto exchange platforms Coinbase, Luno, and Crypto.com as a result.
Although the proposed regulation effectively means tighter rules on crypto-related operations in the UK, some see it as good news. London-based fintech company Revolut, which offers trading in both crypto and stocks, praised the news.
“Clear guidance in how companies describe their crypto offering will benefit consumers and help improve trust in the sector,” Ed Cooper, head of the crypto department at Revolut, said. Blair Halliday, the UK head of crypto exchange Gemini, approved by the FCA, also welcomed the move, noting that a lack of regulation in the sphere could lead to consumers “doing business with organizations that are advertising products and services not subject to regulatory oversight.”
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