Crypto companies will face stricter advertising rules according to plans set by the UK Treasury to strengthen consumer protection in the fast-growing digital asset industry, while global regulators are tightening the screws on how tokens are being promoted.
IN statement On Tuesday, British Chancellor Rishi Sunak said that crypto assets could offer people new ways of transactions and investments “but it is important not to sell products to consumers with false claims”.
The government said it would seek to change the law to give the Financial Behavior Authority oversight of most cryptocurrency promotions “to the same high standards as other financial promotions such as stocks, stocks and insurance products.”
A change in UK policy comes after Spain this week imposed restrictions on the promotion of cryptocurrencies, while the Italian regulator warned of the risks consumers who had little knowledge of finance. Singapore oversight has also joined other major financial regulators in crackdown and this week banned advertising on public transport and through influential people on social media.
Advertising for crypto tokens and exchange offices has greatly increased in the rise in cryptocurrency prices during the pandemic. Last year, British market regulators estimated that 2.3 million people in the country own some crypto assets.
Crypto ads on London public transport they attracted special attention.
The new rules, set by the finance ministry following a consultation process that began in 2020, will put crypto ads under the scope of existing financial promotion legislation, which says “financial promotions must be fair, clear and not misleading”.
Under these rules, financial advertisements must come from a company authorized by the FCA or the Credit Rating Agency, or approved in advance by an authorized group.
“I doubt many cryptocurrency providers will struggle to advertise products in the future because I think FCA-authorized companies will not want or be able to approve financial promotions related to cryptocurrency,” said Jonathan Master, a partner at law firm Eversheds Sutherland. “Which authorized FCA company will push its head over the parapet?”
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Dan Moczulski, the UK’s chief executive for eToro, which has branched out into cryptocurrencies in addition to stock trading, said the new rules would help level the playing field.
“This will mean that offshore service providers must adhere to the same regulations as everyone else,” he said.
So far, the responsibility for crypto advertising has been largely with the Advertising Standards Board. The addition of FCA oversight represents a major tightening of the rules, as the powers of the ASA are generally limited to investigating ads after the fact, rather than requiring prior approval. The FCA may also impose fines on companies for serious violations of their standards.
“We welcome the changes proposed by the Treasury today and are considering our approach to regulating the promotion of cryptocurrencies,” the FCA said in a statement. “We continue to raise awareness of the risks of investing in cryptocurrencies and have warned consumers that if they invest, they should be prepared to lose all their money.”
Conservative MP Harriett Baldwin, a member of the Finance Ministry’s select committee, welcomed the changes, but said it was important that the new regime did not support cryptocurrencies. “I think the first thing I want to see is to make it clear that these are not investments in the way that stocks or bonds are an investment,” she said.
Several London elected officials called for a ban on crypto ads on public transport after “memecoin” Floki Inu, named after Elon Musk’s dog, launched an advertising blitz last year on subway trains and buses in the UK capital. Floki Inu declined to publicly identify the people or companies that supported his token.
Last month, ASA rebuked seven crypto groups for a wide range of promotions, including online campaigns and the use of influencers on social media, saying “something needs to change quickly in the online space”.
The government also said that in some cases, crypto-loans and decentralized financing projects could be covered by the new rules, while it set out plans to expand calls for blockchain technology to give it more flexibility in the future.
It will take at least a few months for the new rules to take effect. The government has said it will pass a new law “when parliamentary time allows” and provide for a transitional period of about six months after the rules are established.