LONDON — The U.K. government says it will bring cryptocurrency ads under tighter scrutiny and crack down on “misleading” claims that may cause investors to lose money.
Finance Minister Rishi Sunak plans to bring the ads under the same rules for financial promotions, according to proposals announced Tuesday.
The government will introduce legislation to amend existing laws on financial advertising to include crypto. The regime requires firms to be authorized by regulators if they want to promote investment products.
The Financial Conduct Authority, a U.K. watchdog tasked with regulating financial firms, will soon start consulting on their proposed financial promotions rules for cryptocurrencies, the government said.
“Cryptoassets 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,” Sunak said in a statement.
The FCA has attracted criticism for not taking action against crypto ads, which flooded London’s underground rail network and buses in the past year as interest in bitcoin and other digital currencies has risen.
The FCA warns cryptocurrencies are not regulated, and that people investing in them should be prepared to lose all their money. While the regulatory body doesn’t have any say over the crypto market specifically, it is getting tougher on companies operating in the sector.
Last June, the watchdog hit Binance, the world’s largest crypto exchange, with a sharp warning saying the firm is not authorized to undertake any regulated activity. While Binance can still sell its services to U.K. residents through its website, it must show a notice explaining its British unit is not regulated.
Tuesday’s announcement means the FCA will eventually have the power to clamp down on crypto ads.
British fintech firm Revolut, which offers trading in crypto and stocks, said it welcomes the news.
“Clear guidance in how companies describe their crypto offering will benefit consumers and help improve trust in the sector,” said Ed Cooper, Revolut’s head of crypto. “Revolut continues to follow the financial promotions rules in its crypto communications.”
Britain’s Advertising Standards Authority has already taken action against several crypto adverts. The regulator banned seven ads in December from companies including Coinbase and Papa John’s for “irresponsibly taking advantage of consumers’ inexperience.”
It also blocked a promotion from the crypto exchange Luno, which encouraged people to buy bitcoin without warning of the risks involved in trading cryptocurrencies. The ASA also said it is on “red alert” over the issue.
While bitcoin had a stellar year in 2021, climbing almost 60%, it and other digital tokens are notoriously volatile. They’ve been known to rise or fall more than 10% in a single day.
Bitcoin is currently down about 40% from an all-time high of nearly $69,000, which it hit in November.
Finance Minister Rishi Sunak plans to bring crypto ads under the same rules that apply to financial promotions.