Advertising cryptocurrencies – staying on the right side of the regulatory line
What are the key issues to be alive to when advertising cryptocurrencies and NFTs?
The key takeaway
Be careful when advertising cryptocurrencies and NFTs and ensure that enough information is given to consumers on the technologies, how they work and the potential fluctuation in their value.
In the past couple of years some cryptocurrencies like Bitcoin have reached dizzying monetary heights. The resulting spike in popularity has led to increased marketing of this emerging technology to a wider audience.
In response, the Advertising Standards Authority (ASA) published a guidance note in April 2021 advising crypto businesses on what they need to think about when it comes to advertising their digital assets.
The ASA first notes that cryptocurrencies are currently not regulated by the Financial Conduct Authority (FCA), so any advertisements should not imply that they are. Even though platforms where these currencies are sold might be regulated by the FCA, care must be taken so that this distinction is made in any ads involving these platforms. The aim is that consumers clearly understand the lack of regulation around the cryptocurrencies.
The volatility of cryptocurrencies’ value presents a difficulty in advertising. The ASA states therefore that advertisers must make clear that the value of investments is variable and, unless guaranteed, can go down as well as up. Consumers need to be made aware of the possibility of their investment losing value, as well as potentially increasing in value. The ASA also notes that small print within an ad disclosing this might not be enough to comply, ie clear signposting is needed.
The CAP Code also requires that advertisers explain products in ways that are easily understood by those they are addressing. Cryptocurrencies and blockchain can be very difficult to understand for the average consumer, so advertisers need to make sure any advertisements are clear on what they are and how they work.
The ASA also discusses the emergence of NFTs, or non-fungible tokens, which have also risen in popularity recently. NFTs are often sold in relation to digital artworks, and it needs to be made clear to consumers that they may be buying a method of tracking ownership of the artwork but might not include the ability to share or commercialise the artwork.
Why is this important?
The complexity and novelty of new technology – especially one which carries risk and which many consumers do not fully understand - raises challenges in the communication of specifics and functionality, which leaves the door wide open for unintentional non-compliance. The ASA’s new guidance note is a solid starting point for staying on the right side of the regulatory line.
Any practical tips?
Don’t forget the ASA’s guidance when advertising cryptocurrencies and/or NFTs. Above all, given the complexities, err on the side of caution by being as clear as possible when explaining how cryptocurrencies and/or NFTs work.