The UK’s HM Treasury, who acts as the ministry of economy and finance, said it might give the Financial Conduct Authority (FCA) a free hand to monitor advertisements issued by unauthorized firms, including those related to cryptocurrency.
As of today, finance companies that are not under the supervision of the FCA must get approval from any authorized firm to promote a financial product through advertising. However, the government hinted that this approach might not efficiently filter out potential misleading claims or even scammers.
The Treasury’s recent proposal will require authorized financial companies to get the FCA nod before they green-light an advert from unregulated firms. In this way, the British financial watchdog will have more influence on unauthorized firms.
John Glen, economic secretary to the Treasury, explained:
“It’s important that people can understand the financial products they see promoted. 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.”
Right now, the promotion of cryptocurrencies like Bitcoin and Ethereum is not regulated in Britain. However, the number of crypto-related ads is increasing at a rapid pace. The Treasury is worried that these ads are often aimed at retail investors and that many of them provide misleading information. The promotions should be candid about any potential risks, the government said.
As the Treasury puts it, the goal is not to constrain the market but rather support innovation in the financial sector while making sure that consumers are safe.
On Monday, stockbroker AJ Bell reportedly said that the watchdog had a difficult task of cracking down “on the Wild West of the crypto-market.”
Laura Suter, a personal finance analyst at AJ Bell, commented:
“The FCA has previously said that its hands were tied in some of its work on cryptocurrencies, as it didn’t have the power to regulate much of the market — but this move will change that.”
She added that advertising was really powerful for cryptocurrency firms. Over 30% of those who purchased Bitcoin or other cryptocurrencies did so because an advert had encouraged them, she said. However, many of those are not fully aware of the risks involved.
Finance companies have to respond to the Treasury’s proposal until October 25.