The UK government is taking steps to protect consumers from misleading advertising of cryptocurrency products. With an estimated 2.3 million people in the country owning some form of cryptoasset, the government is concerned about the declining understanding of these financial products and the potential for mis-selling to investors.
To address this issue, the government plans to amend the existing Financial Promotion Order to ensure that the promotion of cryptoassets is subject to the same regulations as other financial products such as stocks, shares, and insurance. This means that businesses promoting these investments must be authorized by the Financial Conduct Authority (FCA) or have their promotion content approved by a regulated firm.
According to research by the FCA, over 4% of the population now owns cryptocurrency assets, with a median value of £300. While consumers are increasingly viewing these investments as legitimate, those who are influenced by misleading advertising are more likely to regret their purchases.
Mis-selling of cryptocurrency products is not the same as outright fraud, as the products being sold are genuine. However, it highlights the challenges faced by investors in the cryptocurrency market, which is still largely unregulated and prone to scams.
Investment fraud is a significant concern, with the FBI reporting over $336 million lost to scammers in 2020. This makes it one of the highest-grossing cybercrimes, second only to romance scams and business email compromise.
Chancellor Rishi Sunak emphasized the importance of protecting consumers while supporting innovation in the cryptoasset market. By implementing stricter regulations on the advertising of cryptocurrency products, the government aims to ensure that consumers are not misled by false claims and can make informed investment decisions.
Overall, the government’s crackdown on cryptocurrency advertising is a positive step towards safeguarding consumers and promoting transparency in the rapidly evolving crypto market.