New advertising rules for crypto providers aim to protect consumers

The continuing fascination with cryptocurrencies and the use of cryptocurrency as a legitimate payment medium and investment asset has given rise to loads of crypto providers claiming big returns. Unfortunately, many of the claims made are wildly exaggerated and fail to properly highlight the risks involved in cryptocurrencies. Such uncontrolled advertising has necessitated new advertising rules in respect of crypto advertising.

After consultation with stakeholders in the cryptocurrency industry, the Advertising Regulatory Board (“ARB”) added a new paragraph 17 to the Code of Advertising Practice (“Code”) aiming to protect consumers from exaggerated advertising and promises of unrealistic returns when investing in cryptocurrencies. These new advertising rules form part of a broader strategy to better regulate the cryptocurrency industry.

The newly inserted paragraph 17 in section 3 of the Code determines the following:

Any advertisement by a crypto asset provider must inform the consumer in clear and understandable language about the volatility of crypto assets. Advertisements must therefore expressly 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
Clear communication on the returns, features, risks and benefits associated with a particular crypto asset product is essential.
The advertisement should not in any way try to contradict the warnings about the projected risks, benefits and features of a crypto product or service.
Advertisements about crypto assets should have or communicate the following: “Investing in crypto assets may result in the loss of capital”.
The crypto asset provider must provide documentary evidence supporting how rates of returns, forecasts or projections are calculated.
Consumers must be made aware that any positive historical performance does not imply positive future performance. For example, the cryptocurrency market performing well in a particular month, should not in any way be used to create the perception that the market will perform well again in the following month.
Advertisements by crypto asset service providers who are not registered credit providers are prohibited from advertising and providing crypto assets on credit or through payment arrangements to consumers. Influencers or ambassadors used to promote crypto asset products or services may share factual information only, and may not offer advice on trading or investing in crypto assets or make promises regarding benefits or returns.

The ARB has stressed the importance of ethical advertising in the cryptocurrency industry and requires crypto advertisements by advertisers to promote transparency and provide a balanced message about the projected benefits, risks and features of cryptocurrency. These new advertising rules can only benefit consumers, who should take care when dealing with service providers or advertisers that do not adhere to these new rules.

Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s).

March 29, 2023
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