Treasury Planning to Regulate Cryptoasset promotions
The Treasury is consulting regarding plans to regulate promotion of specific cryptoassets through Financial Conduct Authority (FCA) in order to strengthen its role in approving promotions by unauthorised firms.
John Glen, Economic secretary to the Treasury, has said that it’s important for people to understand the products they see promoted.
He further said that this is the reason as to why we want more protection around the promotion of such financial products, including promotion of cryptoassets, while making sure that people have access to a number of products available on the market.
Currently, if an unauthorised firm wishes to promote a specific product then in that case it must get approval to promote the product by any firm having the power or authority to do so. There is no set criteria or process through which a firm is assessed as competent and suitable before it is able to approve the promotions of financial products by unauthorised firms.
However, the government has said that the vast quantity and variety of products available on the market today means that this no longer can be considered as a strong enough safeguard.
In recent years, the authority has identified multiple cases where in authorised firms failed in satisfying requirements that were needed to be comply with in relation to the approval of promotions of financial products by unauthorised persons.
This also includes cases where the firm giving the approval failed in undertaking adequate due diligence in order to ensure the financial promotions it approved met the requirements set out by the FCA. In addition, some instances were found in which firms gave approval of promotions of products which were beyond their realm of expertise and therefore resulted in non-compliance of the rules laid out by the authority in this regard.
The treasury is also consulting on plans and proposals to develop a regulatory test or criteria, which a firm must pass before it gets the authority to approve the promotions financial products of unauthorised firms. Any firm wanting to approve the promotions of unauthorised firms would first be required to obtain the authority’s consent.
The Treasury has said that promotion of a product like cryptoasset that is currently not being regulated by any authority, but their proliferation, and the fact that they are usually targeted towards individual investors, points the importance of promotions indicating towards the underlying risks.
In order to make sure that the government proposes to extend the perimeter of the promotions to include specific cryptoassets, means that their promotion would be subject to the same standards for accuracy, clarity and fairness that are applicable to promotions of traditional financial products.The consultation asks for opinion and feedback on a variety of issues, including the definition of the cryptoassets that are to be considered as controlled investments.