The cracks in the British crypto raid

"If you see Bitcoin underground, it is time to buy", it said in an advertisement of a cryptocurrency app, which has since been punished by the British advertising supervision to underestimate the risks of an investment in volatile assets. For politicians and supervisory authorities, it seems to go through hard when crypto is advertised in public transport in London.

The Ministry of Finance said this week that the British financial supervision will begin to monitor crypto advertising, so far outside the advertising regime of the Financial Conduct Authority. The supervisory authority, which has a consumer protection obligation, stipulates that financial products may only be sold fairly by authorized companies or risk criminal prosecution.

The FCA also plans to tighten the general rules for promoting risky systems. Eyeing health warnings in ads such as "Do not invest if you are not willing to lose your entire invested money" will be necessary to replace the tasteless "risk capital".

The movements are welcome as far as they go. The pandemic accelerated the trend for armchair dealers, just a click of risky investments. The shift in responsibility for monitoring crypto advertising campaigns to the FCA, which has stricter, more proactive powers than advertising supervision, will probably help remove the bottom feeder from a possibly very dark pond. Warnings in plain language are clearly necessary: The FCA assumes that 45 percent of new investors did not understand without using financial advice that money is an investment risk.

The Ministry of Finance must now go through: it only said that it intends to submit secondary laws for crypto advertising, "as soon as parliamentary time allows it". With a parliament that is distracted by scandals, such loose time obligations give the opportunity to step onto the street.

The plan also makes great confidence in the fact that the FCA is able to combat unfair or even fraudulent advertising. His latest record suggests that certain skepticism is justified. The collapse of London Capital & Finance in the amount of £ 236 million, in which 11,600 first -time and pensioners were confronted with the destruction of their savings, showed that the FCA reacted slowly to warnings of advertising campaigns that were carried out by authorized companies themselves. Hope must be that an FCA overhaul in the course of the 2019 scandal was comprehensive.

The LCF scandal also illustrated the confusing admission thicket, in which a company can be regulated, but not a product. Companies were able to use their limited FCA approval to market unregulated products. The fear is that the cryptosphere will go in this direction: Ultimately, crypto-assets remain unregulated, which means that consumers are not covered by the British compensation system if something goes wrong. The new advertising rules mean that there will be a regulatory patchwork that applies to crypto companies and not to products and is not easily understood by the general public. 69 percent of the buyers faithfully believe that crypto FCA is regulated. This means that warnings formulated precisely, but must be easy to understand.

It will also be crucial for the Ministry of Finance to implement its consultations about the ability of consumers to certify themselves as an experienced investor. Products that are marketed to these investors are excluded from the advertising rules. The FCA considers the self -certification too easy. The government has already ignored calls to oblige social media and online platforms to remove unfair advertising or open fraud. But tightening the funding rules for risky investments without improving the self -certification system would leave a gap that is big enough so that the spiv can take advantage of it and the cavaliers could fail or weaken.