Chancellor Rishi Sunak
(Picture: AP)Chancellor Rishi Sunak has launched a crackdown on “misleading” cryptocurrency adverts, amid rising concerns about low levels of investor understanding in the market.
New rules proposed by the government mean ads for tokens and other crypto investments will now fall under the Financial Conduct Authority’s purview. The regulator will be able to enforce accuracy and make sure adverts properly warn about the associated risks.
The rules will spell an end to “get rich quick adverts” enticing buyers to get in on the next bitcoin or dogecoin. Instead, adverts must warn prospective buyers they facing losing all their money and be realistic about growth forecasts.
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.”
An estimated 2.3 million have invested in crypto assets in the UK, according to the FCA, but research by the regulator shows understanding of how these products work and the risks associated with them is poor.
Adoption of crypto grew rapidly in the UK in part because of an advertising blitz. Figures obtained by the Guardian show that almost 40,000 cryptocurrency ads ran on the London Underground in just a six month period last year.
Laura Suter, head of personal finance at AJ Bell, said: “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.”
Watchdogs have been cracking down in recent months, with TfL curbing promotions and the Advertising Standards Authority saying it was on “red alert”.
Sunak’s proposed reforms are likely to face questions as to how effective they will be. The FCA has struggled to get to grips with the mini-bond scandal in recent years, which was largely fuelled by scam ads running online. The regulator has in the past complained about being unable to deal with the volume of scam ads generated.
Suter said: “A crackdown on advertising will have a limited impact, as most people find out about cryptocurrency elsewhere and very few are encouraged to actually buy it from an advert. Overwhelmingly people hear about crypto through social media.”
