HMRC have announced a consultation period for new proposals aimed at making it safer to buy financial products and ‘cryptoassets’. This is the government’s term for what is otherwise known as ‘cryptocurrency’, like Bitcoin and Ethereum. They are concerned that unregulated or inaccurate advertising are misleading consumers into greater risks.
What are the government’s proposals to tackle these issues?
John Glen, the Economic Secretary to the Treasury and City Minister, said: It’s important that people can understand the financial products they see promoted. If adverts by unauthorised 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 cryptoassets, while continuing to ensure people have access to a wide range of products on the market.”
They are proposing two solutions, both of which are in the consultation part of the process. One is to introduce regulation for he advertising of cryptoassets. The second is to tighten up the existing approvals necessary for unauthorised companies to advertise financial products.
Regulation of advertising cryptoassets
Cryptoasset advertising is prevalent across all social media channels. And we’ve all received dodgy ‘buy our bitcoin’ spam emails. What’s slightly shocking is that the promotion of cryptoassets is not currently regulated at all. Despite the fact that there are just as many risks as traditional investments.
The law is playing catch up with the technology and our government are using this proposal as a starting block. The new proposal is that cryptoassets come under the umbrella of the existing regulations that govern the promotion of other financial goods. Because of the risk equivalence, the companies selling these assets should be expected to have the same level of integrity in their advertising.
The official legalese reads: “regulatory perimeter under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) (RAO) requires extension in relation to cryptoassets that have comparable features to specified investments but currently fall outside the perimeter.”
Changes for unauthorised companies
At the moment, unauthorised companies selling financial products must get their ad campaigns agreed by an authorised business. The government propose to add another security check layer to this process. Their plan is that authorised financial companies must be rubber stamped by the Financial Conduct Authority (FCA) before they are allowed to approve any unauthorised business’s promotions. This give the FCA more “oversight” and will make it easier to track the chain of consent.
Why are these proposals important?
Misleading, unclear advertising leads to an unsafe place for consumers. When it comes to making purchases you need the whole picture. This means that promotional campaigns give you all the information you need to make the best decision for you. When it comes to high risk, high value purchases, this clarity is even more important. That’s HMRC’s aim here. Safeguarding of the consumer against “misleading promotions.”
They run alongside the new regulations concerning HMRC’s taxation of earnings from trading in cryptoassets.
Have your say
If this directly affects you, as a consumer or as an industry business, there are consultation documents you can participate in.