It will probably come as no surprise to anyone that the UK Government is starting to take a closer look at Cryptocurrency, whether it should be more tightly regulated and whether there should be stricter rules as to how it can be promoted. In the grand scheme of things Cryptocurrency is relatively new, which is why until now it has remained largely unregulated within the UK. However, as it starts to become more popular, the UK Government are starting to look into whether they need to step in and create some legislation surrounding digital currency.
What’s Happened?
At the start of 2022, both the UK Government and the Advertising Standards Agency started to look more closely into Cryptocurrency. It was predictable that the use of digital currency is something that would need to be looked at more formally; however, the start of the year also saw the way it is advertised being looked into.
The first part of 2022 saw the Advertising Standards Agency release guidance surrounding the promotion of Cryptoassets, although as yet it is unclear whether it covers just Cryptocurrency or everything else as well.
Currently, the Financial Conduct Authority (FCA) define Cryptoassets as “cryptographically secured digital representations of value or contractual rights that use some type of distributed ledger technology (DLT) and can be transferred, stored or traded electronically.”
This means that the FCA cover Cryptocurrency, utility tokens and NFTs under the same categories – so it is likely that adverts surrounding these currencies will be dealt with in the same way too.
What Changes Will We See?
There have always been strict rules in the UK regarding advertising and companies being unable to make misleading claims. Any adverts that people feel do not comply with the rules can be reported to the Advertising Standards Agency who in turn can insist that the advert is changed and can fine the company in question. Although we’re not expected to see any changes come into play in 2023 it was announced this year that the UK Government plans to look into the rules around Cryptocurrency and other Cryptoassets and one part of this would be to look at how they can be advertising.
There are several changes that we expect to see, although a big part of this will be around ensuring that adverts make it clear that Cryptocurrency is not protected in the same way other currencies are. Adverts should ensure that anyone considering investing in their Cryptocurrency is aware that they are not given protection by the Financial Ombudsman Service or the Financial Services Compensation Scheme.
It is expected that adverts will need to ensure that adverts do not take advantage of people’s inexperience in Cryptocurrency. The Advertising Standards Authority (ASA) always advises against using jargon in adverts and this will be reiterated to the Cryptocurrency industry when the time comes. However, there are no exact rules to say what is considered jargon and what is not, it is just expected that advertisers will operate in the right way. Much like other adverts regarding more traditional investment options, adverts are expected to highlight to people that the value of their investment can go down as well as up. Adverts should also make clear that fees such as Capital Gains Tax could be payable on any profits made from investing, including in Cryptocurrency.
Advertisers are going to be expected to make it very clear how investments work and ensure that people know what they get into before they commit to investing. For example, letting people know that past performance is not a guide for future performance – so people should do their own research and ensure that they know everything before they decide to invest. It will be important that adverts don’t use misleading statements or exaggerate claims in order to tempt people into investing in something that they aren’t expecting.
For more, these rules can only be a good thing as it means a level playing field for all those involved in the marketing of Cryptocurrency. This will all be alongside the UK Government looking more deeply into the buying, selling and trading of Cryptocurrency and whether things need to be put in place to ensure that these are regulated. Some will worry that regulation will spoil what Cryptocurrency stands for, but when we consider what benefits industries such as gambling have seen from fair regulation it could be a good thing to have some solid rules in place for the industry.
These plans set out by the government could lead to regulation similar to what we have seen with the fastest withdrawal casinos – which have to be advertised in a way that complies with the rules or risk hefty fines.
What Does The Future Hold for Cryptocurrency?
Although digital currency isn’t set to go anywhere soon, most with an interest in it accept that things are likely to change in the future. It is all well and good having a mostly unregulated way to trade currency but this holds little protection for those involved. We know that other financial industries such as gambling have strict rules regarding customers and their safety, so there is every chance that in the future the regulation of Cryptocurrency could follow in the same footsteps.
We already know that the Advertising Standard Rules coming into play from 2023 are going to be geared toward ensuring that people are informed before they decide to dive into Cryptocurrency investments. This could easily be likened to slot machines online, where the odds of winning and what they can win must be clearly displayed before people part with their money.
As digital currency becomes more mainstream and we see more people interested in being involved, it stands to reason that rules and regulations surrounding this will need to change too. This is no different to things like rules put in place by the UK Gambling Commission – where we see rules often updated to keep up with the way people are currently betting and what trends have taken off.
