Crypto regulatory focus shifts to the next phase

With regimes now firmly in place or relevant AML/CFT laws amended, regulators across the world turn their attention to the next phase of crypto asset supervision - consumer protection. VASPs can expect further stringent requirements for what has been a largely unrestricted area.


Recent announcements from regulatory authorities signal a new phase of cryptoasset regulation

This week saw financial regulators in the UK, Spain, and Singapore announce plans to strengthen their rules or guidelines governing the marketing of cryptoasset investments, citing suitability concerns and risks of consumer harm.

The UK will bring cryptoasset promotions within scope of its Financial Promotions Order, applying the same rules used for other financial promotions such as stocks or shares. Principally, this would require cryptoasset service providers to be authorised by the FCA, gain pre-approval of any promotion by an authorised person, and for the promotion to be fair, clear, and not misleading. Other more general rules include ensuring; prominent indication of any relevant risks when referencing any potential benefits, that the promotion is presented in a way that is likely to be understood by the average member of the group to whom it is directed, and that the promotion uses a font size in the indication of relevant risks that is at least equal to the predominant font size used throughout the information provided.

Spain will enable its National Securities Market Commission to regulate all types of crypto-related advertisements and bring in new rules for social media influencers and their sponsors. These rules will include a pre-notification requirement prior to publishing any posts and a requirement to provide product risk warnings.

The Monetary Authority of Singapore meanwhile has adopted more stringent guidelines making it clear that cryptoasset service providers (digital payment token providers in Singapore) should only advertise on their own corporate website, mobile application, or official social media account, avoiding any public areas or promotions through third parties such as social media influencers.

A sign of things to come?

Cryptoasset service providers can expect regulatory authorities in other countries to follow suit in the coming months. More so, this clamp down on advertising represents the first move into what can be seen as the second phase of cryptoasset regulation.

Over the last few years, we have seen regulatory authorities scramble to bring cryptoasset service providers into their remit of supervision. Whilst a select few jurisdictions have opted to create dedicated regulatory regimes focusing on several aspects of supervision (such as prudential, conduct of busines, and financial crime), most have only focused on applying anti-money laundering and countering the financing of terrorism (AML/CFT) requirements to cryptoassets by capturing cryptoasset service providers under their financial crime laws and regulations.

With these types of regimes now firmly in place, or relevant AML/CFT laws amended, we can expect regulatory authorities around the world to shift their focus towards the next phase of supervision, namely consumer protection.

What this will mean

Cryptoasset service providers have, up until now, enjoyed relative freedom in their marketing strategies and have taken full advantage of a lack of regulatory oversight in this area. In 2021 for instance, crypto adverts reached record levels on London public transport with Transport for London reporting 39,560 crypto-related adverts from 13 firms in the six months between April and September[1].

A regulatory focus towards consumer protection is likely to change this and more. In the short term, cryptoasset service providers are likely to see restrictions on how they can advertise. Requirements could range from pre-authorisation or the inclusions of risk warnings in some countries to outright marketing bans in others. Over time, we can expect to see more stringent requirements relating to customer onboarding, product suitability assessments, and account opening incentives.

As a guide to how this could develop, we can look back to how regulatory authorities responded over the previous decade to the growing number of firms offering high-risk contracts for difference investment products (CFDs). Whilst some jurisdictions chose to simply ban CFDs, others sought to develop consumer protection measures designed to limit the risks these products posed to retail customers. Some of these measures included standardised risk warnings, customer suitability questionnaires, restrictions on leveraging limits, margin close out rules, restrictions on incentives offered to trade CFDs, and mandatory disclosures of profit-loss ratios on a CFD provider’s retail client account.


Cryptoasset service providers should ensure that processes are in place for the review and approval of any future advertising campaigns. Controls should be established to ensure that these promotions are fair, clear, and not misleading.  Casting one’s eye to the future, service providers should also be looking to strengthen their front of house teams and onboarding procedures for the purpose of customer support. Complaints handling, leverage and margin policies, and risk disclosure are all likely to be areas subject to future regulatory scrutiny.

The latest clampdowns on the advertising of cryptoasset investments are likely to be just the beginning in a push by regulators towards greater levels of consumer protection. We can expect any future measures to have a significant impact on an industry that has until now, been left largely unrestricted.

[.c-source][1] Cryptocurrency ads reach record levels on London transport – The Guardian, 14 January 2022[.c-source]