Laura Suter, personal finance analyst at investment platform AJ Bell, comments on the plans for the FCA to regulate crypto promotions:
“After a surge in cryptocurrency buying in the past year, the Government has decided to take action and proposed that the FCA be given powers to regulate adverts and promotions in the cryptocurrency market. 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.
“Advertising is incredibly powerful in the cryptocurrency market. More than a third of people who bought cryptocurrencies did so because an advert had encouraged them*. But those people are also less likely to understand the risks involved and more likely to regret buying cryptocurrencies.
“Social media has played a big part in the boom in cryptocurrency buying, as it’s so easy for posts to be seen by thousands of people in a matter of minutes. But the claims made in the posts are often fantasy and there is very little oversight of what people are claiming. A crackdown on cryptocurrency advertising, particularly on social media, would prevent more vulnerable people from buying and protect them from losses.
“However, if the Government proposals are passed, the FCA has a massive task on its hands of cracking down on the Wild West of the crypto-market, which is populated by scammers and fraudsters as well as legitimate businesses. With so much of the advertising and false claims made online, on social media and directly to retail investors, weeding out the rogues in the market is job of gargantuan proportions.”
* FCA research: https://www.fca.org.uk/publication/research/research-note-cryptoasset-consumer-research-2020.pdf
