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UK Treasury cracks down on misleading cryptocurrency promotions

UK Treasury cracks down on misleading cryptocurrency promotions

 

As global regulators tighten the screw on how their tokens are promoted, crypto companies will face stricter advertising rules under a plan set by the UK Treasury to strengthen consumer protection in the fast-growing digital asset industry.

British Prime Minister Rishi Sunak said in a statement Tuesday that cryptocurrencies could offer people new ways to trade and invest.

The government has said it will amend the law to allow the Financial Conduct Authority to oversee most cryptocurrency promotions “to the same high standards as other financial promotions such as stocks, stocks and insurance products.”

The change in UK policy comes after Spain imposed restrictions on cryptocurrency promotions this week, after Italian regulators warned consumers with little or no financial knowledge of the risks. Singapore’s watchdog group, along with other large financial regulators, has been involved in the crackdown and has banned advertising on public transport and social media influencers this week.

Advertisements for crypto tokens and exchanges have become widespread as cryptocurrency prices have skyrocketed during the pandemic. Last year, UK market regulators estimated that 2.3 million people owned some crypto assets in the UK.

Cryptocurrency ads on London public transport have been particularly noteworthy.

A new rule set by the Ministry of Finance after the consultation process started in 2020 will bring crypto advertising within the scope of existing laws for financial promotion that “financial promotions must be fair, clear and not misleading”.

These rules require that financial advertisements be provided by companies approved by the FCA or Prudential Regulation Authority, or must be pre-approved by an approved group.

Jonathan Master, partner at law firm Eversheds Sutherland, said, “I think many crypto providers will struggle to advertise their products in the future because they believe FCA approved companies either don’t or can’t approve financial promotions related to crypto.” “Which FCA-accredited company would stick its head over the railing?”

Dan Moczulski, UK managing director of eToro, which has expanded its business into cryptocurrency alongside stock trading, said the new rules will help level the playing field.

“This means that offshore providers have to follow the same rules as everyone else,” he said.

Until now, the responsibility for crypto advertising rested primarily with advertising standards bodies. Adding FCA oversight greatly strengthens the rules, as the ASA’s powers are usually limited to investigating advertisements ex post rather than requiring prior approval. The FCA can also impose fines on companies for serious violations of the standard.

“We welcome the changes proposed by the Treasury today and are considering an approach to regulating the promotion of cryptocurrencies,” the FCA said in a statement. “We continue to raise awareness of the risks of investing in crypto assets and warn consumers that investing in them should be prepared to lose all their money.”

Conservative MP Harriet Baldwin, a member of the Treasury’s selection committee, welcomed the change, but said it was important that the new regime did not appear to support crypto. “The most important thing I want to see is to make it clear that this is not an investment in the way a stock or bond is an investment,” she said.

After Floki Inu, “memecoin,” named after Elon Musk’s dog, launched an advertising blitz on the British capital’s subways and buses last year, several elected officials in London have called for a ban on crypto advertising on public transport. Floki Inu has refused to publicly identify who or what company backed the token.

Last month, the ASA rebuked seven cryptocurrency groups for “something has to change quickly in the online space” for a wide range of promotions, including online campaigns and social media influencers.

The government has also revealed that in some cases cryptocurrency lending and decentralized finance projects may be the scope of the new rules, and plans to expand references to blockchain technology to provide more flexibility in the future.

It will take at least several months for the new rules to go into effect. The government has said it will submit the new bill “as time permits by Congress” and will provide a transition period of about six months once the rules are finalized.

Video: Cryptocurrencies: How Regulators Lost Control

Sources

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2/ https://www.ft.com/content/d58c5181-aabc-47e5-bac1-8f68dc43928d

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