Government strengthens cryptocurrency regulation
Advertising of assets to be overseen by financial services watchdog
The government is to strengthen the rules on advertising of cryptocurrencies and hand regulatory responsibility for the promotion of the market to the Financial Conduct Authority (FCA).
It is estimated that over two million people in the UK own cryptocurrencies such as Bitcoin, Ethereum or Tether. But understanding of how such digital assets work remains low among the general population, according to the government.
Chancellor Rishi Sunak said that, if consumers do not fully understand what they are buying, there is a risk that these products could be mis-sold, adding that the government wants companies marketing them to be covered by the same rules as mainstream financial institutions.
“Crypto assets 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,” he said. “We are ensuring consumers are protected, while also supporting innovation of the crypto-asset market.”
Having consulted on the matter in 2020, the government now plans to legislate so the promotion of cryptocurrencies comes under the remit of the FCA, which sets the rules under which financial products such as stocks, shares, and insurance policies can be promoted.
Simon Jones of financial comparison website InvestingReviews said the change is “long overdue”, adding that as things stand the crypto world is “enveloped in smoke and mirrors”.
“People need to go into crypto currencies with their eyes wide open rather than because of the promise of spectacular returns,” he said. “The bearish performance of Bitcoin in recent months underlines the volatility of cryptocurrencies. Whenever real money can evaporate in a matter of minutes or even seconds, investors need to be adequately forewarned. Right now, far too many investors are not fully aware of the extreme volatility of this asset class.”
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