Compliance
UK Treasury Cracks Down On Crypto
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The UK's financial watchdog will regulate new rules for the promotion of cryptocurrencies after the government publishes plans to protect consumers from misleading claims.
The UK
government is to strengthen rules for cryptocurrency adverts
to protect consumers from misleading claims, the Treasury
announced this week.
The government wants rules for marketing cryptoassets to be
brought into line with those for financial promotions such as
stocks, shares and insurance, to ensure that they are fair
and clear. The new rules to increase consumer protection are
to be regulated by the Financial
Conduct Authority.
The FCA is proposing to ban investment incentives such as
refer-a-friend bonuses or new-joiner giveaways and to tighten
rules on financial marketing and risk warnings under the proposed
reforms, which are now under consultation.
Around 2.3 million people in the UK own cryptoassets.
However, while the sector is increasing in popularity, the
government believes that the understanding of cryptocurrencies is
actually declining, suggesting that some users may not fully
understand what they are buying, thereby posing a mis-selling
risk.
“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,”
Rishi Sunak, chancellor of the exchequer, said. “We are ensuring
consumers are protected, while also supporting innovation of the
cryptoasset market.”
Under the rules proposed by the FCA , consumers who want to
make certain high-risk investments would also be asked more
robust questions about their knowledge and investment
experience. The FCA also plans to categorise qualifying
cryptoassets as “Restricted Mass Market Investments,” meaning
that consumers would only be able to respond to crypto asset
financial promotions if they are classed as restricted, high net
worth or sophisticated investors, it said. Firms issuing such
promotions would have to adhere to FCA rules, or face fines.
“Too many people are being led to invest in products they don’t
understand and which are too risky for them. People need clear,
fair information and proper risk warnings if they are to invest
with confidence, which is the central aim of our consumer
investments strategy,” Sarah Pritchard, executive director of
markets at the FCA, said.
A consultation on the proposed rules launched by the
regulator this week closes on 23 March 2022.