Industry experts have welcomed news that the UK government will crackdown on advertisements for digital assets.
Crypto companies left reeling from a Treasury announcement that the Financial Conduct Authority (FCA) would be granted powers to crackdown on advertisements for digital assets. The government today announced that digital assets will be subjected to the same rules on promotions as other financial products including stocks, shares and insurance products following concerns that crypto adverts are misleading the public.
Blair Halliday, the UK lead for FCA regulated digital assets exchange Gemini, “welcomed” the decision to review crypto advertising standards.
“Only a select number of companies in the space, such as ourselves, have earned regulatory approval by the FCA as an EMI and as a registered CryptoAsset firm,” said Halliday, warning that a lack of oversight means “consumers could be doing business with organisations that are advertising products and services not subject to regulatory oversight.”
The head of crypto at British fintech Revolut also reacted positively to the announcement. Ed Cooper said: “Clear guidance in how companies describe their crypto offering will benefit consumers and help improve trust in the sector. As part of our goal to be the safest place to trade, use and learn about crypto, Revolut continues to follow the financial promotions rules in its crypto communications.”
“Something is clearly needed,” says Charles Kerrigan, a FinTech partner with law firm CMS. “Utility tokens are not within the FCA’s remit. This has meant that ads promoting them have taken advantage of being out of scope. It is a virtue of crypto that ordinary people have the opportunity to invest alongside professionals, but the crypto mantra of do you own research can’t be a defence when it’s clear that people are failing to do that.”
While the FCA will shortly begin the process of consulting on new rules covering crypto adverts, some analysts are concerned that their remit does not stretch far enough.
“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,” commented Laura Suter, head of personal finance at AJ Bell.
“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,” Suter added, pointing out that five per cent of people who were considering purchasing crypto did so because of an advert.
“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,” Suter continued.
Across Europe government’s are reacting to concerns that investors are put at risk by a lack of regulation around crypto asset advertisements. Yesterday, Spain’s national securities market commission was granted powers to oversee the promotion of crypto adverts by companies and social media influencers.