CAP publishes new guidance on crypto ads

What should advertisers do to keep crypto ads within the rules?

The key takeaway

The ASA is urging advertisers to be cautious when promoting cryptoassets to consumers and has issued guidance on how to stick within the rules of the CAP Code, in particular to help avoid situations in which misleading claims are being promoted and which encourage consumers to invest without understanding the risks of buying an unregulated product. 

The background

As cryptoassets (such as cryptocurrencies, utility tokens and non-fungible tokens (NFTs)) grow in popularity, there has been a spike in the number of ASA complaints about their advertising. In the second week of December 2021 alone, the ASA upheld seven rulings against cryptocurrency trading ads. 
The majority of cryptoassets are not regulated by the FCA and are unlikely to be until at least 2023. The FCA is therefore currently unable to exercise its powers to restrict the advertising of cryptoassets in the UK. The burden therefore falls on the ASA to oversee the sector. Note also that NFTs are excluded from the government’s announced changes and so will remain under the ASA's remit.

The development

In light of the above, the Committee of Advertising Practice (CAP) has issued guidance to advertisers to help them ensure that their promotional material falls within the rules of the CAP Code. The guidance sets out clear principles for advertisers to follow, in particular they should:

• make it clear (in a clear and prominent way) that cryptoassets are not regulated by the FCA. Ads must also make clear that cryptoassets are not protected by financial compensation schemes, so that consumers will not be afforded any protections by the Financial ombudsman Scheme (FOS) or Financial Services Compensation Scheme (FSCS). This was a common error on ads investigated by the ASA during 2021
• not exploit customer’s relative inexperience in dealing with cryptoassets (in line with CAP Code rule 14.1). Advertisers should consider where an ad is being placed, and whether it is intended for a targeted or untargeted audience (ie a specialist financial publication vs an outdoor poster). The ASA advises against the use of financial jargon that a standard consumer would struggle to understand. The ASA also expects businesses to clearly signpost the risks involved when dealing with cryptoassets
• ensure all material information is visible, including specifying that the products advertised are cryptoassets. This is particularly relevant for products such as “Fan Tokens”, which may be misconstrued as something other than a cryptoasset
• make clear that the value of cryptoassets is volatile and that investments linked to their performance may go down as well as up
• state the basis for predicted value of the advertised asset clearly and ensure that the basis used to calculate this are clearly highlighted
• ensure customers are aware that past performance does not necessarily have a bearing on, and should not be seen as a guide for, future performance.

Why is this important?

The ASA has stated that it will engage in “proactive monitoring and enforcement” of offending crypto ads. Given the proliferation of the industry and the potential risks to consumers of purchasing or investing in unregulated assets, it seems inconceivable that the ASA will not continue to take the strictest possible line with non-compliant crypto advertisers. 

Any practical tips?

Any company seeking to promote a cryptocurrency, NFT or other crypto product should take care to ensure they comply with this new guidance. It is surprisingly easy to find crypto ads making claims that fall foul of this guidance, for example by providing an estimate for projected earnings from the investment. This remains an area where high levels of caution are advised.