A hard rain is coming for UK’s crypto boom
Source:https://techcrunch.com/2022/01/19/a-hard-rain-is-coming-for-uks-crypto-boom/ A hard rain is coming for UK’s crypto boom 2023-01-22 22:54:34

The U.K.’s ad-fuelled boom in crypto trading looks to be headed for major speed restrictions: The country’s financial watchdog said it will beef up rules around marketing of crypto assets and could even put limits on who can invest, following government confirmation yesterday that it will extend the regulator’s remit to cover crypto.

In recent years, ads for crypto have been plastered over billboards across the U.K. capital — fuelling a boom in trading that has led to a few slaps from the advertising standards watchdog.

In December, the Advertising Standards Authority banned seven crypto ads for “irresponsibly taking advantage of consumers’ inexperience and for failing to illustrate the risk of the investment” — saying it hoped to produce new guidance on crypto advertising.

But the financial watchdog’s intervention looks set to put a more significant dampener on the U.K. crypto bubble.

In an announcement trailing the proposed changes, the Financial Conduct Authority (FCA) said it’s acting in response to concerns about the “ease and speed” that people can make high risk investments — in line with a Consumer Investment Strategy it published last year.

The plan for new crypto rules — which the FCA said will be confirmed by summer 2022 — include proposed restrictions on the marketing and uptake of cryptoassets.

“[T]he FCA plans to categorise qualifying cryptoassets as ‘Restricted Mass Market Investments’, meaning consumers would only be able to respond to cryptoasset financial promotions if they are classed as restricted, high net worth or sophisticated investors,” the regulator writes.

“Firms issuing such promotions would have to adhere to FCA rules, such as the requirement to be clear, fair and not misleading,” it adds.

The regulator is consulting on the proposals — with a deadline of March 23 for responses.

In a statement, Sarah Pritchard, the FCA’s executive director of markets, added: “Too many people are being led to invest in products they don’t understand and which are too risky for them. People need clear, fair information and proper risk warnings if they are to invest with confidence, which is the central aim of our consumer investments strategy.”

Yesterday the government confirmed it will legislate to bring the promotion of cryptoassets within the scope of financial promotions legislation to tackle misleading advertising — writing (or, well, warning) that: “This means the promotion of qualifying cryptoassets will be subject to FCA rules in line with the same high standards that other financial promotions such as stocks, shares, and insurance products are held to.”

In a statement, Chancellor Rishi Sunak, added: “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.

“We are ensuring consumers are protected, while also supporting innovation of the cryptoasset market.”

Cryptoasset consumer research, published by the FCA last summer, suggested that some 2.3 million Brits owned crypto (out of a U.K. population of ~52M) — which amounts to just under 4.5% of Brits holding crypto. In 2020 the FCA said that around 1.9M Brits held cryptoassets — suggesting there’s been a percentage increase of ~21% year over year, per the research.

Other estimates of the number of Brits holding crypto that have been bandied around by crypto press in recent months have touted even bigger figures (but, well, the crypto trading press is itself often located inside the hype bubble).

The marketing frenzy around crypto trading in the U.K. certainly appears to have fuelled rising awareness among the population, with the FCA finding that 78% of adults had heard of cryptocurrencies — up from 42% in 2019; and 73% in 2020.

However in another finding that likely sharpened its concern, the regulator found that despite rising awareness the level of understanding of cryptocurrencies was declining — suggesting “some crypto users may not fully understand what they’re buying”, as it (politely) puts it. Ya think?!

The FCA research also found fewer crypto users regard buying the assets as a gamble (38%, down from 47%); and more see them as an alternative or complement to mainstream investments, with half of crypto users saying they intend to invest more…

Ergo, it’s not difficult to see why the U.K. government and financial regulator have decided it’s past time to step in with regulatory limits to stop clueless Brits from throwing money at Ponzi-like schemes wrapped in shiny crypto marketing.

Other countries are taking similar steps.

Just this week, Singapore’s financial regulator announced its own clamp down on crypto marketing (via Nikkei Asia).

Some other countries are going even further — with planned cryptocurrency bans in China and India.

The free-for-all trading party isn’t over yet but regulators around the globe are slowly closing in on cryptoland’s gangsta paradise.

 

Tech, Technology Source:https://techcrunch.com/2022/01/19/a-hard-rain-is-coming-for-uks-crypto-boom/

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