Ministers are considering a cryptocurrency crackdown (Photo: Reuters)
Ministers are weighing up a regulatory crackdown on digital investment crazes such as cryptocurrencies and non-fungible tokens (NFTs) in 2022 amid growing warnings they could prove dangerous for vulnerable young people.
Football clubs, individual players and online influencers have been promoting crypto products including “fan tokens” and digital artworks. They are lightly regulated in the UK despite the similarites with speculative investments and gambling games, both of which are tightly controlled by the authorities.
No agency is directly responsible for the regulation of crypto assets, with only the Advertising Standards Authority (ASA) taking a proactive stance in stamping out abusive practices in the industry.
But MPs and campaigners are calling for the Government to do more in the coming months, including by taking crypto into the scope of the upcoming comprehensive gambling review, and the Financial Conduct Authority (FCA) is understood to be keen to gain additional powers to investigate the sector.
In addition to well-known cryptocurrencies such as Bitcoin and Ether, there are dozens of smaller “coins” which are rarely used for payment but are usually bought by investors who are speculating that they will increase in value over time.
NFTs use the same blockchain technology as cryptocurrencies to prove individual ownership of items such as digital images. i revealed in November that experts fear football fans risk losing money by investing in NFTs which are promoted by stars such as Wayne Rooney and John Terry.
Arsenal was recently rebuked by the ASA for advertising fan tokens which are said to be a way for supporters to gain a stake in the club, but provide few concrete benefits and have been falling in value.
Conservative MP Richard Holden told i: “It is the Wild West, this grey area between highly leveraged financial investments on the one hand and these products which could quite easily and sensibly be considered to be gambling. There needs to be a clear differentiation there in order to protect people.”
Matt Zarb-Cousin, a former Jeremy Corbyn aide and campaigner for gambling protection, added: “It is one thing for football clubs to market gambling to fans, which could lead to people destroying their lives as a consequence, but I think it’s on another level, it’s even worse to be offering a way into cryptocurrency through the pretence of empowering them in effectively a completely unregulated area. There’s clearly massive issues that are being stored up.”
The Treasury is preparing its response to a consultation which closed in 2020 about how best to regulate the industry. A spokesperson said: “We are taking action to protect consumers in response to the development of certain cryptoassets. This includes consulting on proposals to ensure cryptoasset promotions are fair, clear and not misleading and that crypto assets meet the same high standards expected of other payment methods.”
The FCA is only empowered to regulate crypto assets if there is a danger of their breaching money laundering or terror laws. The agency said: “Given the lack of regulatory protections and the highly speculative nature of crypto investment, we have consistently warned that people should be prepared to lose all their money.”
The ASA said: “Crypto assets have exploded in popularity in recent years, but there’s a real danger that people may be drawn in to invest life savings that they later lose based on poor understanding. We recognise the important role we play in regulating ads to ensure they don’t mislead consumers about a product’s risks or act irresponsibly in their promotion.” It will shortly be publishing new guidance to companies on how they can market the assets without breaking the rules.