New laws to tackle misleading crypto-asset adverts

New laws will be passed to deal with misleading crypto-asset promotions, the Treasury has announced.

Although 2.3 million people in the UK own a crypto-asset, the government is worried some consumers may not understand what they are buying.

Crypto-assets such as Bitcoin are largely unregulated and investors lack many protections.

The same is true of non-fungible tokens - but these will not be covered by the new rules.

The government plans to legislate so "qualifying crypto-assets" will be subject to Financial Conduct Authority (FCA) rules in the same way as other financial promotions, such as for stocks, shares, and insurance products.

A 2018 report by the Crypto-assets Taskforce - which includes the Treasury, Bank of England and FCA - found crypto advertising could often overstate benefits and rarely warned of the risk consumers could lose their investment.

Later work by the FCA suggested public understanding of crypto-assets was declining even as more people invested.

Chancellor Rishi Sunak said the new rules would ensure consumers are protected, "while also supporting innovation of the crypto-asset market".

"Crypto-assets 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" he said.

The government says it is still drafting a definition of the crypto-assets that will fall under the new rules.

But it will not include non-fungible tokens.

NFT's are often used as a form of digital receipt as well as a way of trading digital art or "collectibles".

Some of the most valuable trade for millions of pounds.

And the government acknowledged many were traded as a type of financial speculation.

But it said: "New types of non-fungible tokens have emerged which blur the boundary between financial-services products and digital collector items."

And it was "not the the government's intention to apply financial-promotions regulation to non-financial products".

However, the Treasury said it would closely monitor the situation.

The FCA is not the only watchdog concerned about crypto advertisements.

The Advertising Standards Authority says monitoring crypto-assets such as Bitcoin is a "red-alert priority", following concerns many ads fail to fully convey the risks of investing.

It has banned numerous promotions for crypto-assets, including from a pizza chain and a football club, and is working towards new guidelines for advertisers.

Internationally, regulators are also taking action.

The Spanish National Securities Market Commission has announced new rules for advertising crypto-assets, including promotions by social-media influencers, Reuters reports.