The UK Government is set to impose stricter regulations on cryptocurrency advertisements and promotions, which pose a potential risk to investors that remain uninformed about the risks involved surrounding crypto assets.
The UK Government has expressed its intent to intensify oversight over “misleading and inadequate promotions” that potentially puts retail investors at risk.
The proposals, that were published on Monday July 20th through the national government’s website, call for all crypto companies to undergo a regulatory gateway before they are approved to promote their products. It stipulates that the Financial Conduct Authority (FCA) would be established as the body responsible for monitoring all digital assets promotions.
Should the proposals take effect, all authorized crypto businesses will have to adhere to these new regulations.
These actions follow a 2018 report from the government’s Crypto Assets Task Force, which revealed that misleading promotions and advertisements for crypto products posed a major investor protection issue.
John Glen, the economic secretary to the Treasury and City Minister, believes that current regulations have not been sufficient to cover the expanding number of products that have been released to the market.
“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”, he explained.
Glen added that the proposals would set advertisements for crypto products up to the same levels as other asset classes.
The proposal is currently under consultation until October 25th. Last month the FCA published a report entitled the Crypto Asset Consumer Research 2020. The study found that there was a “statistically significant increase in those who hold or held cryptocurrencies from approximately 1.5 million people to 2.6 million people”.
It estimates that 5.35% of the general population hold or held cryptocurrencies, a marked increase from the 3% that responded to the last time the survey was held, which was conducted face to face with a smaller sample.
In addition, the number of people who had never heard of cryptocurrencies dropped to 27% from 58%. The report states that this is an “increase in the percentage of those being aware of cryptocurrencies from 42% to 73% of adults”.
Survey participants placed Bitcoin as the most recognized cryptocurrency, followed by Bitcoin Cash, Ethereum, Bitcoin SV, and Litecoin. The majority of the respondents (77%) purchased their cryptocurrencies through online exchanges, with the top five exchanges of choice being Coinbase, Binance, Kraken, Bittrex, and Bitfinex.