Plans to strengthen the rules on cryptoasset advertisements and protect consumers from misleading claims have been published by the UK government.
The government plans to legislate to address misleading cryptoasset promotions, writing that adverts will be brought into line with other financial advertising, ensuring they are fair and clear, and it writes that new rules will increase consumer protection while encouraging innovation.
Chancellor of the Exchequer, Rishi Sunak says: “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 UK’s FCA has commented on cryptocurrencies in its latest report on its research into the sector.
The body writes: “Overall, public awareness and our estimate for ownership is up to around 2.3 million, up from around 1.9 million in 2020 – and 78 per cent of adults have now heard of cryptocurrencies…The level of understanding of cryptocurrencies is declining, suggesting that some crypto users may not fully understand what they are buying. Median holdings have risen (up from GBP260 to GBP300) in a strong period of price increases, but the profile of cryptocurrency owners has not changed substantially – the population remains skewed towards men who are over 35 and are from the AB social grade.
“However, we find that attitudes have shifted, as cryptocurrencies appear to have become more normalised – fewer crypto users regard them as a gamble (38 per cent, down from 47 per cent) and more see them as an alternative or complement to mainstream investments, with half of crypto users saying they intend to invest more.”
Laura Suter, head of personal finance at AJ Bell, has commented on the Government’s move to regulate cryptocurrency adverts.
“The UK has followed in the footsteps of Spain and Singapore in cracking down on cryptocurrency advertising, with new rules bringing the adverts in line with other financial promotions. The move means that the FCA will have oversight of crypto adverts, in a bid to limit the number of misleading adverts touting bitcoin and other cryptocurrencies. One in 20 UK adults either currently own cryptocurrency or have owned it in the past, showing just how widespread cryptos have become,” Suter says.
“You only have to glance through a few cryptocurrency adverts to see that many overstate the potential returns on offer and fail to clearly lay out how much risk individuals will be taking. The Advertising Standards Agency has already been banning individual crypto adverts that it deems misleading or understating the risk involved in the market, but this new move by the Government will lead to a wholesale tightening of the rules governing adverts.
“However, the FCA’s own research shows that a crackdown on advertising will have a limited impact, as most people find out about cryptocurrency elsewhere and very few are encouraged to actually buy it from an advert. The regulator’s data showed that only 2 per cent of the people it questioned were led to buy crypto from an advert when they previously hadn’t planned to, and just 5 per cent who were thinking about buying made the leap because of an advert.
“Overwhelmingly people hear about crypto through social media, with the FCA finding that 39 per cent of people saw ads for crypto on Instagram, Facebook or other social media, compared to 13 per cent for traditional advertising in newspapers or TV.
“While the move will help some people, it won’t stop the outright scams that have exploded off the back of bitcoin and other cryptos soaring in price. What would have a far bigger impact is cracking down on social media accounts where people claim to have made their millions from buying bitcoin, most of which are ultimately scams or glorified pyramid schemes.”