- The Advertising Regulatory Board (ARB) has added a new clause to its Code of Advertising Practice, specifically dealing with cryptocurrency.
- The new clause is aimed at protecting consumers from being misled by unethical advertisers.
- Moving forward those who advertise cryptocurrency locally must clearly state that, “Investing in crypto assets may result in the loss of capital.”
In recent months we have seen the cryptocurrency landscape come into question, as volatile digital currencies have faltered, pump-and-dump scams have been on the rise, and a handful of high-profile exchanges have collapsed.
Now the issue of crypto ads has cropped up locally, as the Advertising Regulatory Board (ARB) has updated its Code of Advertising Practice. To that end a new clause has been added specifically targeting crypto ads, with a view of better protecting South African consumers when it comes to misleading advertising.
“The new rules are aimed at protecting consumers from being misled by unethical advertisers and are the result of consultation and agreement with the cryptocurrency industry,” added the ARB in a press release sent to Hypertext.
“This is a wonderful example of an industry that sees the harm that could be done in its name, and steps up to self-regulate the issues without being forced to do so by government. This has been an exciting project and we know that it will result in better protection for vulnerable consumers,” continued Gail Schimmel, CEO of the ARB, regarding the recent update.
The new clause is 17 of Section III within the Code of Advertising Practice, specifically noting the following.
“17.1 Advertisements must expressly and clearly state that investing in crypto assets may result in the loss of capital as the value is variable and can go up as well as down. The wording should be, or should communicate the same, as the following example:
- Investing in crypto assets may result in the loss of capital.“
Moving forward then, advertisers will need to make the risk of investing in crypto far clearer. It also seems to be change that has been welcomed by one of the biggest local players – Luno.
“Rules around ethical advertising are non-negotiable for us as an industry. We don’t want rogue advertisers making claims that mislead vulnerable consumers about the reality of crypto investment. It is important to us that consumers enter this exciting market with their eyes open and their expectations realistic,” explained Marius Reitz, GM for Africa at Luno, who is also said to have spear-headed this project.
While the addition of the clause is welcome, it will be interesting to see what action, if any, the ARB will take on advertisers who do not adhere to these new rules regarding crypto ads. As such, it will prove a test of the teeth it has to enforce this addition to the Code of Advertising Practice.
The remainder of Clause 17 is as follows:
“17.2 Advertisements must comply with Clauses 2 and 4.2.1 of Section II In particular:
17.2.1. The overall message of the advertisement must not contradict the warning statements set out in Clause 17.1 above.
17.2.2. An advertisement for a particular crypto asset service or product must explain the relevant product or service in a way that is easily understandable for the intended target audience.
17.2.3 Advertisements must give a balanced message about the returns, features, benefits and risks associated with the product or service.
17.2.4 Rates of return, projections and forecasts must be supported by adequate substantiation that complies with the requirements of Clause 4.1 of Section II. It must be communicated how any rate of return, projection or forecast is calculated and what significant conditions apply.
17.2.5 Information presented about past performance must make it clear that the past performance is not indicative of future performance. Any historical period or past performance should not be presented in such a way that it creates a favourable impression of the advertised product or service.
17.3. Advertisements by crypto asset service providers who are not registered credit providers should not encourage the purchase of crypto assets on credit. This does not preclude advertisements providing information about the payment methods offered by crypto asset service providers.
17.4. Where influencers or ambassadors are used to promote a crypto asset product or service, the requirements of Appendix K must be complied with. In particular, the influencer or ambassador may share factual information only. Influencers and ambassadors may not offer advice on trading or investing in crypto assets and may not promise benefits or returns.”