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
