New Laws To Be Imposed To Address Misleading Crypto-asset Adverts

New laws will be passed to deal with misleading crypto-asset promotions, the Treasury has announced. Although 2.3 million people in the UK own a crypto-asset, the government is worried some consumers may not understand what they are buying. Crypto-assets such as Bitcoin are largely unregulated and investors lack many protections. 

The same is true of non-fungible tokens – but these will not be covered by the new rules this time around due to their unique properties which blur the boundary between financial products and collectibles. Later work by the FCA suggested public understanding of crypto assets was declining even as more people invested in them despite growing interest from businesses and corporations looking to build blockchain products and services. Chancellor Rishi Sunak said the new rules would ensure consumers are protected, “while also supporting innovation of the crypto-asset market”.

“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. The government says it is still drafting a definition of the crypto assets that will fall under the new rules. However, financial speculation on NFTs won’t be covered by the upcoming legislation as there is no decision yet on how to define them and their properties blur into other markets. 

The Treasury said it would closely monitor this area. Meanwhile, some NFT stakeholders had proposed applying securities regulation to all token sales in order to apply consumer protections to NFTs in the same way. Today, this was not ruled out but the FCA will instead be focusing on clarifying what counts as a security in their upcoming guidance. There are also calls for global consistency with crypto-asset regulation, including from regulators in Japan which is home to many blockchain products and services. The Netherlands recently published its own MDI framework for crypto assets called “MATRIX” which defines four asset types – payment coins, utility tokens, hybrid coins, and securities coins.

The Financial Conduct Authority (FCA) is also working towards getting better rules in place for consumers engaging with cryptocurrency ads – due to concerns that many promotions fail to fully convey risks of investing there. The majority of these promotions will fall outside of the new laws. This includes a case taken up by the ASA against cryptocurrency exchange CoinBene, after it was accused of not including material information about fees and charges in its adverts.

On Saturday (20th July), the Treasury announced that new rules would be added to this year’s Finance Bill which is currently making its way through Parliament.

The rules will cover advertising for financial products related to crypto assets, such as CFDs and spread betting or other derivatives which are used for speculation or investment.” said Sunak. There are also calls for global consistency with crypto-asset regulation, including from regulators in Japan which is home to many blockchain products and services. The Netherlands recently published its own MDI framework for crypto assets called MATRIX which defines four asset types – payment coins, utility tokens, hybrid coins, and securities coins.

The majority of these promotions will fall outside of the new laws. This includes a case taken up by the ASA against cryptocurrency exchange CoinBene, after it was accused of not including material information about fees and charges in its adverts. 

On Saturday (20th July), the Treasury announced that new rules would be added to this year’s Finance Bill which is currently making its way through Parliament.