UK watchdog seeks powers to regulate crypto ads
15:00, 28 September 2021
The UK’s financial services watchdog, the Financial Conduct Authority (FCA), is speaking to the government about being granted powers to oversee crypto advertising.
The FCA’s board was asked about its approach to regulating cryptocurrencies by members of public during the City watchdog's annual meeting.
“The FCA has a really limited remit in terms of cryptoassets and cryptoassets-related activities. They largely sit outside our regulatory framework,” FCA markets director Sarah Pritchard explained.
She went on to say that one of the regulator's main concerns when it comes to cryptoassets is people's understanding of the risks associated with investing in them.
Be prepared to lose money
She said: “We know that people are increasingly owning cryptoassets – aproximately 2.3 million of us hold cryptocurrencies and cryptoassets and, worryingly, our data shows that around 14% are using credit to do so, which increases people's exposure to loss.”
“And even more worryingly, we have data that shows that 12% of those people think that crypto is somehow protected by the FCA or Financial Services Compensation Scheme.”
Referencing a recent speech by FCA chair Charles Randell, Pritchard said: “You will hear us tell people regularly that they should be prepared to lose all their money when they invest in cryptoassets. And of course, that is a risk that some may take, but I think that it is important that people are aware of the risks that they face.”
Misleading promotions
Speaking about future legislation of crypto, Pritchard said the regulator was working closely with government departments and the Treasury.
“Particularly, we’re looking at potentially strengthening the scope of financial promotions rules so that those that are making financial promotions and promoting cryptoassets will be brought within the regulatory perimeter.”
“That's for the government to legislate on. But we’re working closely with treasury and other partners as the legislative and regulatory framework develops.”
Under the current rules, firms are required to ensure that their financial communication and financial promotions comply with the FCA’s rules and are “fair, clear and not misleading”.
However, the regulator’s attempts to police this are have not been without their challenges. In recent years, the FCA has been engaging with Google in its efforts to crack down on scam financial ads, which are often rife on social media.
Warning to tech giants
During the meeting today, the FCA’s executive director of enforcement and market oversight Mark Stewart said that tech giants have to do more to stop “dodgy financial promotions” on their sites.
Steward warned all social media firms to step up their processes or procedures in this area, or face action from the regulator. “We are putting them on notice that we expect them to be involved in this process of protecting the community,” he added.
In July, the UK's Advertising Standards Authority told the Financial Times that monitoring marketing campaigns of unregulated crypto trading platforms is “an absolutely crucial and priority area” for the advertising watchdog.
Read more: FCA to launch campaign against crypto
Related topics