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Clampdown on dodgy crypto ads

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Written by: Emma Lunn
18/01/2022
The government plans to introduce legislation to strengthen the rules on cryptoasset advertisements and protect consumers from misleading claims.

Crypto adverts will be brought into line with other financial advertising, with the aim of ensuring they are “fair and clear”.

About 2.3 million people in the UK are now thought to own a cryptoasset with their popularity rising. But research suggests that some users may not fully understand what they are buying. This poses a risk that these products could be mis-sold.

The government plans to bring the promotion of cryptoassets within the scope of financial promotions legislation. This means the promotion of qualifying cryptoassets will be subject to Financial Conduct Authority (FCA) rules in line with the same standards that other financial promotions such as stocks, shares, and insurance products are held to.

Hayley Millhouse, managing director of OpenMoney, said: “Investing in cryptocurrencies is incredibly high risk, with massive fluctuations in value meaning many people lose money with them. Yet we know from previous research that cryptocurrency ownership is rising in popularity, even though most investors don’t fully understand them or the risks involved.

“The government’s decision to bring the promotion of cryptoassets in line with other financial promotions is very good news. The fact that these assets can currently be pushed to inexperienced investors through traditional adverts, social media influencers, celebrities and even football clubs as an alternative to mainstream investments is completely wrong and puts people at real risk of financial harm. The sooner these misleading promotions are regulated, with the increased consumer protection that creates, the better.”

The Advertising Standards Authority has already banned numerous cryptocurrency adverts for being misleading, taking advantage of customers’ inexperience, and failing to communicate the risk of investment.

Laura Suter, head of personal finance at AJ Bell, said: “The move means that the FCA will have oversight of crypto adverts, in a bid to limit the number of misleading adverts touting Bitcoin and other cryptocurrencies. One in 20 UK adults either currently own cryptocurrency or have owned it in the past, showing just how widespread cryptos have become.

“However, the FCA’s own research shows that a crackdown on advertising will have a limited impact, as most people find out about cryptocurrency elsewhere and very few are encouraged to actually buy it from an advert. The regulator’s data showed that only 2% of the people it questioned were led to buy crypto from an advert when they previously hadn’t planned to, and just 5% who were thinking about buying made the leap because of an advert.

“Overwhelmingly people hear about crypto through social media, with the FCA finding that 39% of people saw ads for crypto on Instagram, Facebook or other social media, compared to 13% for traditional advertising in newspapers or TV.

“While the move will help some people, it won’t stop the outright scams that have exploded off the back of Bitcoin and other cryptos soaring in price. What would have a far bigger impact is cracking down on social media accounts where people claim to have made their millions from buying Bitcoin, most of which are ultimately scams or glorified pyramid schemes.”

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