Chancellor of the Exchequer Rishi Sunak has laid out plans for the UK’s Financial Conduct Authority (FCA) to crack down on misleading adverts of cryptocurrency, bringing it in line with other financial promotions.
A consultation response, published this week, sets out the UK government’s plan to bring the promotion of so-called cryptoassets within the scope of financial promotions legislation. This means the promotion of qualifying cryptoassets will be subject to FCA rules, in line with the same standards that other financial promotions such as stocks, shares, and insurance products are held to.
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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 cryptoasset market.”
The British Indian finance minister’s move involves plans to legislate to address misleading cryptoasset promotions. According to the UK’s Treasury department, around 2.3 million people in the UK are now thought to own a cryptoasset with their popularity rising. However, FCA research suggests that understanding of what crypto actually 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 Treasury said the government’s move to put the FCA in charge is intended to balance the desire to encourage innovation with the need to ensure that cryptoasset advertisements are “fair, clear, and not misleading”.
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The government said it is recognises the potential benefits of certain products like stablecoins, such as providing a more efficient means of payment. In 2018, the UK had launched the Cryptoasset Taskforce, which continues to steer the country’s regulatory response to the cryptoasset market.
However, research undertaken by the FCA highlighted the potential for misleading advertising of crypto products to cause consumer harm. The Treasury said the government’s decision to bring these types of advertisements into the scope of regulation will mitigate the risks of consumer harm, ensuring people have the appropriate information to make informed investment decisions.
The Treasury statement noted: “This will be done via secondary legislation 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 [Prudential Regulation Authority], or the content of the promotion is approved by a firm which is.
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“Firms that wish to promote such investments and activities must comply with binding rules that financial promotions must be fair, clear, and not misleading. This will provide the Financial Conduct Authority with the appropriate powers to regulate the market more effectively.”
The FCA will now be consulting on their proposed financial promotions rules that will apply to cryptoassets.