The finance ministry in the U.K., headed up by the Chancellor of the Exchequer, Rishi Sunak, has made its position clear on crypto advertisements. This comes as crypto advertisements for bitcoin, Floki Inu, and others surge in the U.K.
The ministry has said that rules governing promotions of crypto assets will be brought in line with those controlling traditional financial products. The finance ministry wants to crack down on crypto advertisements that are “ misleading .”
“Crypto-assets can provide exciting new opportunities,” says Sunak. It’s important that consumers are not being sold products with misleading advertisements,” Sunak added. In a 2018 report , the finance ministry found that crypto-asset advertising can often overstate benefits and rarely warns of volatility risks.”
Ads playing a major role in crypto purchases
The finance ministry published a report in 2022. It stated its findings from a consultation with firms, trade bodies, committees, and members of the public. The report found that a promotion’s substance and presentation play a critical role in consumers’ engagement with a product. There is also awareness, but a disregard for warnings issued by the FCA. According to the report, thirty-one percent of digital asset holders in the U.K. were motivated by an advertisement.
According to the report, 2.3 million people now own a crypto asset, but an understanding of the workings of crypto is decreasing. Hence, the ministry is concerned that people may be buying digital assets without understanding how they work.
Under new regulations proposed in the report, crypto-asset providers would need to be authorized by the Financial Conduct Authority or the Bank of England to promote their products. This is part of the Financial Promotion Order. The Financial Promotion Order will also be used to classify qualifying crypto assets. The government and British Parliament will define the legal framework and scope of the Promotion Order, while the FCA will determine firm rules and guidance.
The ads would be held to the same standards as those of stocks and insurance and decentralized finance (DeFi) applications would need to be addressed on a case-by-case basis due to the rapid evolvement of the space.
Response to new framework
Some stakeholders were optimistic that the government’s risk-based approach to regulation of digital assets would help the industry grow and attract new business from consumers. Others believe that a risk-based approach would be best implemented as an addendum to a more customized regulatory framework.
There will be a six-month traditional period to allow for finalization and release of the Financial Promotion Order regime and the FCA rules.
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