The Financial Conduct Authority is set to receive greater powers to keep tabs on unauthorised firms in the investment market and the marketing of unregulated cryptoassets.
In two consultations published yesterday (July 20) HM Treasury warned the current safeguards in place to protect retail investors from misleading adverts and certain types of cryptoassets fell below par.
In a bid to protect consumers the government proposed bringing the promotion of certain types of cryptoassets under the FCA's regulation for the first time.
John Glen, the economic secretary to the Treasury, said: "It’s important that people can understand the financial products they see promoted.
"If adverts by unauthorised firms are misleading, or don’t fully outline the risks, then people can end up losing money."
Under existing rules, if an unauthorised firm wants to market a particular financial product they are first required to get the promotion approved by an authorised firm.
But the Treasury warned the "variety and vast quantity" of products being offered on the market meant the requirement to secure approval from an authorised firm "no longer provided a strong enough safeguard".
As part of its package of proposals the government therefore moved to require authorised firms to obtain specific FCA consent before approving the financial promotions of unauthorised firms.
Mr Glen added: "We want to put more protections in place around such financial promotions, including the promotion of cryptoassets, while continuing to ensure people have access to a wide range of products on the market."
It follows a government pledge in the March 2020 Budget that it intended to consult on measures to bring certain cryptoassets into the scope of financial promotions regulation.
The promotion of cryptoassets is currently unregulated but the government's proposals would see the perimeter of the regulatory regime expanded to include certain types of these products.
The Treasury said: "This would mean that their promotion would be held to the same high standards for fairness, clarity and accuracy that apply to traditional financial services promotions."
Earlier this month research from the City watchdog found the number of consumers who invested in cryptocurrencies had jumped by 74 per cent since last year to reach 2.6m.
But the figures warned one in 10 of these investors remained unaware the cryptocurrencies they owned were unregulated and therefore lacked financial protection.
The FCA has previously warned consumers were turning to cryptoassets, such as Bitcoin, to "get rich quick" despite not understanding what they were purchasing.
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