After serious considerations, the UK government is going to restrict promotions based on cryptocurrencies. The move comes as protection to investors against misinformation. Her Majesty’s Treasury mentioned on July 20 the need to lower levels in the transmission of misleading and sketchy promotions that threaten successes of retail investors in the country.
A 2018 report by the government “Cryptoassets Taskforce” that the circulation of deceitful promotions for cryptocurrency services and products were an issue in protecting investors. It led to the consultations by the UK government on the issues
Following this, the City Minister for the UK’s Financial Services Sector John Glen submitted proposals published on July 20. Companies will be required to pass through necessary regulators for allowance to air crypto promotions.
Problems Presented in Regulations of Crypto Assets
The government categorized the utility and exchange tokens as unregulated crypto assets. The two categories lacked clarity in their definitions, according to the Cryptoassets Taskforce report published in 2018.
They argue that users lacked protection from the dangers of a crippling market and their liability to engage in illegal activities without their knowledge. According to the authorities, users could use cryptocurrencies to fund terrorist activities and move money from illegitimate sources.
The report stated that information concerning crypto assets could be unclear and deceiving to users. FCA Consumer Research concluded that the number of people who held crypto-assets increased from 3% to 5.35%.
Moreover, about 17% of old and new Digital assets owners have experienced challenges when purchasing or owning them. Among the problems include exchange fees, transaction periods, and loss of the Crypto assets. Most of the past users participate in risky investment ventures.
Overview of the UK Government Recommendations
The Financial Promotions Regulations Regime proposed a comprehensive presentation of promotions that aim to provide users with accurate information that suits their needs. Besides, for individuals to operate any financial services in the country, they have to register with the authorities as stipulated in The Financial Services and Market Act 2000 Order 2001 (RAO).
The government is also working towards providing permissions from the FCA for advertising financial promotions. Authorized enterprises will be granted confirmations to promote various products hence avoiding a breach of contract. Avoiding this law may lead to severe implications making the enterprises explain themselves to promoting products without authorization. It can also lead to law enforcement bodies’ involvement in open investigations in case of any severe implications.
According to Glen, the government’s previous efforts in regulations had failed to raise the necessity for new opinions and options. He expects that the proposals put forward would help put all assets at the same level preventing any manipulation of information. However, implementing the propositions is not yet underway since consultations are still ongoing until October this year.