The Advertising Standards Authority (ASA) have published guidance on advertising cryptoassets.
The guidance sets out that, to comply with the CAP Code, advertisers promoting cryptoassets must:
- make it clear that cryptoassets are unregulated and not protected;
- make it clear that the value can go down as well as up
- include all material information
- not take advantage of consumers' inexperience or credulity
- state the basis used to calculate any projections or forecasts
- make clear that past performance is not a guide for future performance
- cryptocurrency profits may be subject to Capital Gains Tax.
The guidance follows a statement issued by the ASA in November 2021 flagging that cryptoasset advertising had become a 'red alert' priority issue for the UK regulatory body and it intended to act. Since issuing its statement last November, the ASA has upheld a number of investigations against cryptoasset-related adverts across a range of brands and media (the "Rulings"). The Rulings provide further useful guidance of how ASA applies the CAP Code to cryptoasset adverts in practice.
We have summarised the key takeaways for advertisers from these Rulings below, in the context of the new guidance.
Brands should ensure they take note and make any changes required. The ASA has since confirmed in in its Enforcement Notice that its Compliance team will take targeted enforcement action from Monday 2 May 2022 to ensure a level-playing-field, which may include the application of sanctions.
Include an appropriate risk warning
As confirmed in the guidance and the Enforcement Notice, the Rulings make it unequivocally clear that cryptocurrency adverts must include a risk warning, which states that:
- the value of investments in cryptocurrency is variable and could go down as well as up; and
- cryptocurrency profits may be subject to Capital Gains Tax; and
- cryptocurrency is an unregulated market.
The ASA based this guidance on its understanding that cryptocurrency is a volatile investment, subject to frequent change that could potentially lead to large losses and its belief that the general public might presume that cryptocurrency is regulated.
However, the Ruling against Payward Ltd t/a Kraken, an online cryptocurrency exchange, demonstrates that simply including a risk warning is not a fail safe way to ensure compliance with the CAP Code. Kraken displayed a 20 second digital poster at London Bridge Station, which did include a statement warning consumers that 'cryptocurrency can be a highly volatile asset class' and 'the services provided by Kraken are unregulated activities in the United Kingdom.' However, the ASA found that, due to the presentation and brevity of the risk warning (which only ran for one second at the beginning of the advert), consumers would not have the necessary time to comprehend the disclaimer in full or apply it to the information that followed for the cryptocurrency product. In the Ruling against Floki Inu, the ASA upheld that, although the poster advertising cryptocurrency did include a risk warning, the relative size of the text in relation to the head claim 'MISSED DOGE. GET FLOKI' was small, and therefore the overriding impression of the ad was the pressing need to buy Floki. Brands must therefore consider how the warning is presented to consumers, in addition to its content.
Brands will also need to determine if there is additional material information that consumers need to be made aware of in the warning statement. In its Ruling against Forisgfs UK Limited t/a crypto.com, the ASA held that the ad, which read 'Buy Bitcoin with credit card instantly', should have clarified that the purchase of cryptocurrency using a credit card could be subject to higher interest rates and extra fees and that some credit card issuers prohibit the buying of cryptocurrency. Further, the ASA noted that examples given of past performance should not be presented in such a way that would imply a similar return in the future was guaranteed if that was not possible. This issue arose in connection with an advert created by Coinbase Europe Ltd, which stated that '£5 in #Bitcoin in 2010 would be worth over £100,000 in January 2021' without qualification.
If the advertising space is limited, provide the consumer with the material information at the earliest opportunity
The CAP Code states that marketing communications must not mislead the consumer by omitting material information. A number of brands investigated by the ASA argued that they had not included material information or appropriate warnings within the cryptocurrency advert due to the limited space. Whilst in some cases, the ASA acknowledged that the brand was constrained by space, the ASA found that the measures the marketer took to make that information available to the consumer by other means were not sufficient.
An in-app ad for Luno Money Ltd, a cryptocurrency exchange service, which read 'Invest in crypto for as little as £1' was challenged by the ASA for not making it clear that fees for buying and selling were applicable. Luno argued that the ad was constrained by space and that the consumer is presented with information, multiple times, about fees for buying or selling throughout the purchase journey. However, the ASA still concluded that the advert was misleading because neither the advert, nor the landing page on the website, included the information about the fees.
Similarly, in the Ruling against crypto.com, the ASA found that it was not sufficient to direct users to the app for the relevant information, instead the appropriate warnings should have been included on the landing pages of the Apple and Google app stores.
A cryptocurrency advert must not suggest that investing in cryptocurrency is straightforward or accessible to everyone
The ASA stated in several Rulings that it believes cryptocurrency investment is 'sophisticated and complex' and any language which leads a consumer to believe investing in cryptocurrency is simple would be considered misleading. In its Ruling against CoinBurp Ltd, a cryptocurrency trading platform, the ASA held that the phrase 'register in minutes, deposit instantly, then make super-easy and secure crypto trades' took advantage of consumers’ lack of experience by implying that cryptocurrency investment was straightforward or accessible. Similarly, the ASA found that an advert for the cryptocurrency exchange app, Exmo Exchange Ltd, which included the phrase 'Get $100 advanced cashback FREE' distracted from what was a serious and potentially costly financial decision.
Both brands argued that the offending language was intended to represent the simple and accessible functionality of their respective platforms rather the cryptocurrency investment itself. The ASA disagreed, finding that, in the absence of information to the contrary, consumers would interpret the overall impression from the ads to mean that investment in cryptocurrency was simple and risk free.
Brands should also be careful not to include content within a cryptocurrency advert, which could be viewed as trivialising cryptocurrency investment. This is best demonstrated by the Ruling against two adverts published by a pizza chain, Papa John's (GB) Ltd, in which 'FREE BITCOIN WORTH £10' was offered when you spent £30 or more on pizza. Here, the ASA held that the use of pizza to promote a cryptocurrency account, encouraged consumers to engage in a high-risk investment without consideration and trivialised what was a serious and potentially costly financial decision.
Do not cause unjustifiable distress
The Enforcement Notice makes is abundantly clear that brands should not trivialise investing in cryptocurrency or take advantage of consumers’ inexperience or credulity. This is best demonstrated by the Ruling against Ziglu Ltd, a cryptocurrency service, which launched a one off campaign with the slogan "Scotland, your capital is at risk" to coincide with the Edinburgh festival. The ASA held that consumers would interpret the claim “Scotland, your capital is at risk” to mean that the capital of all Scottish residents was at risk to the same degree, regardless of how that capital was held. Further, the ASA held that the reference to 'capital' was unclear and advertisers should ensure that it is sufficient clear that the product being advertising was cryptocurrency.
Inform the consumer that cryptocurrency profits are subject to Capital Gains Tax
Finally, in the Rulings, the ASA considered that most consumers are unlikely to be aware that Capital Gains Tax is payable on profits in excess of the annual allowance from investing in cryptocurrency, in the same way they would for more traditional investments, such a ISAs or shares. Brands should ensure that they don't take advantage of consumers' inexperience or credulity.
On this basis, the ASA has clarified that any advertising for cryptocurrency should expressly state that Capital Gains Tax could be payable on profits from investing in cryptocurrency – an issue which arose in multiple Rulings. The Ruling against eToro (UK) Ltd, a stocks and cryptocurrency trading platform, confirmed that a general statement advising clients to seek independent tax advice in the terms and conditions is not sufficient.
On 18 January 2022, HM Treasury issued its response to last year's consultation on financial promotions. The resulting legislation may bring certain unregulated crypto assets within the scope of the UK financial promotion framework and introduce a more robust regime for authorised firms approving financial promotions. It is thought that any new rules will not take effect until at least 2023. Non-Fungible Tokens (NFTs) have been excluded from the proposed changes and will continue to be subject to the Advertising Code. The Treasury response was closely followed, on 19 January 2022, with the FCA's consultation on rules and guidance necessary for implementing this new regime. A summary of HM Treasury's response and the FCA consultation is available here.
Don't over promise
Brands should be careful not to "promise the moon" to customers and consumers, and should make immediate changes to their adverts to reflect the ASA's guidance. Amongst other requirements, brands should also (as set out in the Enforcement Notice) take care not to:
- imply that the product or services are regulated;
- imply that investments are safe or guaranteed, or that past performance is a guide for the future;
- employ fear of missing out (“FOMO”) or imply that investment decisions are simple, easy or for anyone;
- encourage people to invest using credit.