Clampdown on misleading cryptocurrency adverts announced

Cryptocurrency adverts will have to meet the same standards as other financial promotions, such as insurance, to help protect people from potentially misleading claims.

Promotions will be brought into line with other financial advertising, ensuring they are fair and clear, and helping people to make informed decisions, the UK Government said.

Under the plans, the promotion of cryptoassets will come under Financial Conduct Authority (FCA) rules – in line with other financial promotions, for example, stocks, shares, and insurance products.

The Government said this will balance the desire to encourage innovation with the need to ensure adverts are fair, clear, and not misleading.

Around 2.3 million people in the UK are thought to own cryptoassets but research suggests some users may not fully understand what they are buying – posing a risk that products could be mis-sold. Around £300 of cryptoassets are held on average.

Chancellor Rishi Sunak said: “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.

“We are ensuring consumers are protected, while also supporting innovation of the cryptoasset market.”

In 2018 the Government launched the the Cryptoassets Taskforce, to steer the UK’s regulatory response to the market.

The taskforce previously found that misleading advertising and a lack of suitable information was a key consumer protection issue in cryptoasset markets – and cryptoasset advertising can often overstate benefits and rarely warn of volatility risks.

The changes will be brought in by amending the Financial Promotion Order, which sets out the investments and activities to which the financial promotion regime applies.

Under the Financial Services and Markets Act 2000, a business cannot promote a financial product unless they are authorised by the FCA or the PRA (Prudential Regulation Authority), or the content of the promotion is approved by a firm which is.

Firms that wish to promote such investments and activities must comply with binding rules that financial promotions must be fair, clear, and not misleading.

The legislation will be brought forward once parliamentary time allows, the Government said.

Santander UK recently warned that around £1 million of cryptocurrency scams were being reported to it by customers each month.

The bank said it had seen an increase in the value of such cases, which can involve a fraudster taking over a victim’s computer and freezing them out of their accounts.

Customers may see adverts online for cryptocurrency investment “opportunities”, or be introduced to them by other social media users, and adverts can appear to be endorsed by celebrities.

“You only have to glance through a few cryptocurrency adverts to see that many overstate the potential returns on offer and fail to clearly lay out how much risk individuals will be taking.

“The Advertising Standards Agency has already been banning individual crypto adverts that it deems misleading or understating the risk involved in the market, but this new move by the Government will lead to a wholesale tightening of the rules governing adverts.”

Ms Suter added: “While the move will help some people, it won’t stop the outright scams that have exploded off the back of Bitcoin and other cryptos soaring in price.

“What would have a far bigger impact is cracking down on social media accounts.”

Simon Jones of financial comparison website InvestingReviews.co.uk said: “The bearish performance of Bitcoin in recent months underlines the volatility of cryptocurrencies.”

Ed Cooper, head of crypto at financial app Revolut, said: “Clear guidance in how companies describe their crypto offering will benefit consumers and help improve trust in the sector.”

Myron Jobson, personal finance campaigner at Interactive Investor, said: “Many cryptocurrency adverts I’ve seen tap into the FOMO (fear of missing out) culture.”

He added: “Cryptocurrency is highly complex, volatile and, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.

“Our research found that 45% of young adults aged between 18 and 29 are getting their first taste of investing through high-risk cryptocurrency – and an alarming number are funding this through a cocktail of credit cards, student loans, and other loans.”