HM Treasury have published the responses to the 'Cryptoasset promotions' consultation, along with further detail on how the government intends to regulate cryptoasset promotions.
The Consultation was published in August 2020 and was open for responses until 25 October 2020. 25 respondents replied. The government held a roundtable with industry stakeholders and held meetings with trade associations on the issues raised.
The government proposes to extend the legal definition of controlled investments to include unregulated Cryptoassets and bring them within the scope of financial promotions regulation by extending the scope of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (FPO). There is currently no agreed definition for unregulated cryptoassets. A draft definition was included in the consultation document.
The feedback received from the responses was that:
- Misleading advertising and a lack of suitable information meant there was a risk to the consumer and that intervention was required.
- There was, overall, support for the proposed approach.
- There was agreement with the government's definition of qualifying cryptoassets, although there were some concerns:
- There was some concern over the complexity of the definition.
- Hybrid tokens were highlighted as an area of omission.
- The proposed criteria for fungibility and transferability were too confusing for consumers to understand the difference.
- Many wanted further clarity on exemptions.
- It was noted that adjusting the FPO would require changes to the wider regulatory framework to avoid confusion.
- Frequent reviews would be required to ensure the correct activities continued to be captured.
- Several respondents noted that due to the fast-growing nature of the UK market, the 2018 Taskforce report (that was the basis of the consultation) would need updating.
- Nearly all respondents disagreed with the government's decision not to include a transition period.
In response, the government proposes:
- To include a 'transferability exclusion' and keep non-fungible tokens outside of the scope.
- A new proposed exemption for those offering to accept or offer cryptoassets in exchange for goods/services will no longer be added as this is not an inducement to enter into investment activity and is out of scope anyway.
- A six month transition period will be introduced.
Useful guides on this topic
Consultation on cryptoassets promotion
HM Treasury has opened a consultation, ‘Cryptoasset promotions’ into a government proposal to bring the promotion of certain types of cryptoassets within the scope of financial promotions regulation. The proposal is intended to enhance consumer protection while promoting responsible innovation and views are sought up until 25 October.
Cryptoassets Taskforce Final Report: Highlights
The Cryptoassets Taskforce has published its final report. The 'Cryptoassets Taskforce Final report' lays out the UK’s policy and regulatory approach to cryptoassets and distributed ledger technology in financial services. It did not cover tax.
How are Bitcoin, cryptocurrencies or cryptoassets taxed in the UK?
How do you tax Bitcoin? Are cryptocurrency or cryptoasset gains or profits, taxable? Can you obtain tax relief if you make losses on Bitcoin? Gains on transactions in cryptoassets are potentially taxable in the same way as other investments.
Cryptoasset promotions, HM Treasury consultation, July 2020