UK Government intervenes in crypto market

January 24, 2022

The UK Government has confirmed its intention to legislate to bring crypto-assets into the scope of the Financial Promotions Regime.  

The new regime is intended to tackle misleading crypto-asset promotions and adverts. Crypto firms promoting crypto to consumers will need to comply with new regulations on financial promotions.

Key take-aways

  • Government is taking an “agile” approach to cryptoasset regulation. Primary focus is on addressing risk of consumer harm
  • FCA research shows an increase in cryptoasset ownership in the UK (c. 2.3m / 4.4% of population) but a decrease in public understanding of the risks
  • In future, crypto adverts will need to be “fair, clear, and not misleading
  • New rules will apply to UK and overseas firms that target UK consumers
  • Social media adverts will need to be fully compliant
  • Currently unregulated cryptocurrencies (such as bitcoin and ETH) will be in scope
  • NFT carve-out. The rationale being NFTs are more akin to a “digital collector item” than financial service products
  • Crypto-lending and decentralised finance (DeFi) are in scope but will be considered on a “case-by-case” basis

The intervention is not surprising given the Advertising Standards Authority issued a “red alert” on crypto adverts last year. Adverts from Coinbase, Kraken, Luno, and PapaJohns were all banned for breaching standards.

Next steps

  • UK Government and Parliament will set the legal framework and scope of the new regime.
  • There will be a six month transition period to comply with the new laws and rules once final.

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This is a complex area carrying regulatory sanctions and criminal penalties. If you need any advice on what this means for your business, please contact us.

24 January 2022

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