South Africa Regulator Takes Action Against False Crypto Advertising Claims
On January 23, South Africa’s Advertising Regulatory Board (ARB) introduced new cryptocurrency-focused rules into the nation’s advertising code to protect consumers from misleading advertising.
The new guidelines aim to ensure that cryptocurrency advertisements accurately state the risks involved with all cryptocurrency investments, making it clear to consumers that they stand to lose their capital due to market volatility.
“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 ARB stated. In addition, they warned that the overall message of the advertisement must not contradict the warnings about potential money losses set out above.
Ads must rigorously explain the risks and benefits associated with the cryptocurrency product or service they offer.
Misleading Advertising Based on Past Performance Prohibited
Another important aspect of the new guidelines is that crypto-related companies must not use exaggerated or misleading claims in their advertising. This includes making claims of high returns or low risks without providing any evidence to back them up.
Companies must also be transparent about their fees and charges and clearly communicate any risks or limitations associated with their products or services. According to the ARB, the advertisement of crypto-related services must clearly state that “past performance” is not indicative of the future returns that cryptocurrencies may experience. This is in line with the broader regulations applied to financial services, as any publicity for financial products must have a similar disclosure.
Similarly, they noted that those not registered as credit providers “should not encourage the purchase of crypto assets on credit.” However, they may promote information about payment methods used by crypto asset service providers.
Influencers and Ambassadors Must Share Factual Information Only
As for ambassadors and influencers, the ARB determined that such persons may only promote a product if they comply with the regulators’ requirements.
Ambassadors or influencers who do not meet the regulator’s criteria for qualified investors “may only share factual information” without giving additional advice on crypto asset trading or investment. This is a response to the controversy that arose during the bitcoin bull run when many crypto businesses released several controversial ads featuring famous worldwide celebrities to attract as many customers as possible.
For example, Crypto.com launched one of the most aggressive ad campaign in the ecosystem with the participation of actor Matt Damon, who invited his millions of followers to invest in the platform under the slogan “Fortune favors the brave.”
Following the massive crash of the crypto market and the losses of thousands of investors, South Park launched a video mocking Matt Damon, Gwyneth Paltrow, investor Larry David and tennis player Naomi Osaka, who used their image to promote this type of investment.
New South Park movie aired tonight.
They made fun of Matt Damon selling out for Crypto and
— Dyme (@CryptoParadyme) July 13, 2022
Some found it funny, but the ARB started to take things seriously.