The UK government through it´s Majesty’s Treasury is seeking to bring cryptocurrency-related product promotions under the purview of the Financial Conduct Authority (FCA).
This follows a recommendation by the government-appointed Cryptoassets Taskforce in a report from March 2018 in which the Taskforce identified misleading and inappropriate crypto ads as a pain point to protecting consumers in the UK.
The HM Treasury released a policy consultation proposal on Monday seeking input on the same to offer more protection to consumers against misleading ads.
In the 2018 report, the Cryptoassets Taskforce, comprised of the FCA, HM Treasury and the Bank of England, noted that “adverts often overstate benefits and rarely warn of volatility risks, the fact consumers can both grow and lose their investment, and the lack of regulation. There are also examples of regulated firms marketing crypto asset products without clarifying that this part of their business is not regulated.”
Bringing the regulation of the crypto ads under the FCA is an easier route to protecting consumers as opposed to creating a new framework and structure with a new body specifically assigned to the same.
The FCA already regulates activities of financial nature which often covers the cryptocurrency industry. The addition of the cryptocurrency promotion will be a natural extension of the agency’s duties and this change is open for input from the public no later than 12:15 am on 26th October 2020 according to the Monday announcement.
The new proposal was put forth by John Glen, the City Minister responsible for the U.K.’s financial services sector. According to him, retail investors need the most protection from misleading ads both from regulated and unregulated firms.
“If adverts by unauthorized firms are misleading, or don’t fully outline the risks, then people can end up losing money. That’s why we want to put more protections in place around such financial promotions, including the promotion of crypto-assets while continuing to ensure people have access to a wide range of products on the market.”
In implementing a new policy, often regulators are faced with the dilemma of balancing between implementing protections and encouraging innovation. The idea to consult with the public is to ensure that any agreed-upon policy strikes the right balance between the two sides.
The cryptocurrency asset field is nascent and lots of companies are looking to innovate therefore as much as the need for protections is apparent, the government needs to ensure that such innovators are also provided a relatively open canvas to bring new products to the market that are both safe and efficient.
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