Britain to crack down on 'misleading' cryptocurrency adverts

3 minute read

A representation of virtual currency Bitcoin is seen in front of a stock graph in this illustration taken March 15, 2021. REUTERS/Dado Ruvic/Illustration

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LONDON, Jan 18 (Reuters) - Britain is to crack down on "misleading" advertisements for cryptoassets, which often target retail consumers with poor knowledge of the risks, the finance ministry said on Monday.

Rising prices of of cryptocurrencies such as bitcoin and ether have been accompanied by a surge in advertising for such assets, particularly in London, prompting repeated warnings from Bank of England that investors they could lose all their money.

The finance ministry said that about 2.3 million people in Britain now own a crypto asset, but research suggests that understanding of the sector is declining, suggesting that some users may not fully understand what they are buying, the ministry said.

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"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," Britain's finance minister Rishi Sunak said in a statement.

The finance ministry set out findings from a public consultation on promotions for cryptocurrencies.

Advertising of cryptoassets will be brought within the scope of existing financial promotions legislation, the ministry said.

This means that promotion of qualifying cryptoassets will be subject to rules set by the Financial Conduct Authority (FCA), holding them to the same standards as financial promotions for stocks and insurance products, the ministry said.

Only a business regulated by the FCA or Bank of England would be allowed to issue their own promotions for cryptoassets, forcing unregulated firms to pay a regulated company to approve their advertisements.

This longstanding system of approving financial promotions is itself due to be tightened by the FCA.

Industry body CryptoUK said it welcomed any clarity and guidance on promotions and will seek dialogue on how the measures are implemented.

'GLORIFIED PYRAMID SCHEMES'

"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," said Laura Suter, head of personal finance at investment platform AJ Bell.

The ministry said that non-fungible tokens (NFTs) and the distributed ledger technology, or blockchain, that underpins cryptocurreinces would not be included in the new rules on promotions.

Secondary legislation to implement the changes will be brought forward once parliamentary time allows.

Britain's advertising watchdog warned soccer club Arsenal in December over advertisements for its "fan tokens", a type of cryptocurrency embraced by soccer clubs this year as coronavirus pummelled revenue.

The Advertising Standards Agency (ASA) said cryptoassets are a "red-alert priority" amid increased online advertising and promotion.

Other European regulators have moved to tighten curbs on such advertising. Mass cryptoasset campaigns in Spain will require authorisation from the CNMV stock market supervisor, the government said on Monday.

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Reporting by Huw Jones Additional reporting by Tom Wilson Editing by Catherine Evans, Jane Merriman and David Goodman

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