In Brief:
- The UK government plans on tightening the rules on misleading crypto promotions.
- The treasury also released a consultation response, stating that the proposed rules provide the UK watchdog, FCA, which will implement related regulations.
- The proposed rules will improve consumer protection and regulate the crypto market more efficiently.
With the rising popularity of crypto assets, the UK government plans on strengthening the rules on misleading crypto advertisements to improve consumer protection.
The Treasury published a consultation response, saying that the proposed rules provide the UK financial watchdog, the Financial Conduct Authority (FCA) in order to regulate the crypto market more efficiently.
As per the announcement, the government plans to have a six-month transition phase. After that, the proposed Financial Promotion Order regime and the complementary FCA rules will be implemented.
Earlier in 2021, the government began consulting on a proposed framework for regulating crypto advertisements. Since then, the Advertising Standards Authority (ASA) has stepped in to ban misleading crypto promotions several times in the year. In December last year, ASA banned seven companies for violating advertising regulations.
The proposed rules have excluded blockchain under its regulatory framework as it is considered an underlying technology and not an asset.
The consultation response also suggests that while most crypto assets use distributed ledger technology (DLT), it might be that this changes as the technology evolves in the future. Hence, the UK government proposes to remove the reference to DLT from the definition of crypto assets.
According to the document, 71% of the public that heard of crypto assets correctly identifies the definition. The data indicates that crypto users in the country are prone to misleading crypto promotions as the number of people understanding crypto is declining. It also poses a risk that the crypto assets could be mis-sold. To strike a balance, there is a need to ensure crypto advertisements are clear, fair, and not misleading.
