U.K. Proposes Tougher Rules to Stop Misleading Crypto Ads
U.K. Proposes Tougher Rules to Stop Misleading Crypto Ads
(Bloomberg) --
Crypto billboards, which have popped up across the London subway system, will come under tougher U.K. oversight in the latest in a series of steps taken by the government and regulators to stamp out false advertising in the industry.
The Treasury said on Tuesday that it plans to regulate crypto advertising like other financial products and ensure that promotions are “fair, clear and not misleading.”
The news comes a day after a similar announcement from Spain’s market regulator, which slapped controls on ad campaigns for cryptoassets by saying they must carry a warning to investors that they risk losing all their money.
“Research suggests that understanding of what crypto actually is is declining, suggesting that some users may not fully understand what they are buying,” the U.K. Treasury said in a statement. The tougher rules will be phased in over six months once they’re finalized.
Crypto has drawn the attention of regulators globally as a result of the volatile price movements of digital assets -- from Bitcoin and Ether down to memecoins such as Shiba Inu -- as well as the complexity of the products and lack of consumer protection. In the U.K., Britain’s advertising regulator has handed down a stream of rulings against crypto-related advertising, setting a consistent line against some of the key names in the industry. The U.K.’s Financial Conduct Authority, meanwhile, has issued frequent warnings about the risks in crypto, saying last January that investors “should be prepared to lose all their money.”
Papa John’s, Arsenal
Cryptocurrencies have become increasingly popular with the British public. The FCA published research on consumer ownership of crypto in June that found people persuaded by ads were much more likely to regret their purchases. It estimated 2.3 million people in the U.K. hold cryptocurrencies.
Recent actions by U.K. regulators have targeted not just industry giants such as crypto exchanges Coinbase Global Inc. and Kraken, but also a range of household names with crypto promotions, including Papa John’s Pizza and the Arsenal Football Club soccer team.
Most recently, the U.K.’s Advertising Standards Authority banned two Crypto.com ads, warning the company to make sure they did not “irresponsibly take advantage of consumers’ lack of experience or credulity by irresponsibly encouraging investing in cryptocurrency using a credit card.” Last year, an Instagram ad by celebrity Kim Kardashian drew the ire of Charles Randell, chair of the FCA, who called for regulators to be given greater powers to protect consumers.
Cryptoassets are “a red-alert priority” for the ASA, Toby King, a spokesman for the advertising authority, said in an emailed statement Tuesday that welcomed the Treasury’s news. “Bringing the regulation of ads for such products in line with other financial products will provide more certainty and bolster protections for consumers,” he added.
The advertising authority will continue to clamp down on misleading or irresponsible cryptoasset ads that fall within our remit and will work closely with the FCA to continue protecting consumers in the long term,” King said.
The FCA has already banned the sale of crypto derivatives to retail customers, while acknowledging it does not regulate the underlying cryptocurrencies. Crypto firms are required to meet the FCA’s anti-money laundering standards.
Some crypto watchers say the new laws and any increasing clarity on regulation could ultimately be helpful as the industry matures. The new laws “may be a clear indication that the U.K. government intends to regulate a market that appears to be unstoppable and inevitable due to increased mass adoption,” said Walid Koudmani, market analyst at financial brokerage XBT, said in an emailed statement. “This could not only protect the current participants in this market, but it could ultimately encourage new investors to join as it would eliminate one of the main barriers to entry that some encounter, lack of regulation.”
©2022 Bloomberg L.P.