Who: The Advertising Standards Authority (ASA), Luno Money Ltd (Luno), Papa John’s (GB) Ltd (Papa John’s), Coinbase Europe (Coinbase), eToro (UK) Ltd (eToro), Exmo Exchange Ltd (Exmo), Arsenal Football Club plc (Arsenal Football Club), Skrill Ltd (Skrill), CoinBurp Ltd (CoinBurp), Forisgfs UK Ltd (Crypto.com).
Where: United Kingdom
When: December 2021
Law stated as at: 5 January 2022
The Advertising Standards Authority ( ASA) ruled against several cryptocurrency ads in December in relation to advertisers such as Luno, Coinbase, eToro, Exmo, Papa John’s and Arsenal Football Club. It’s clear from the rulings that the ASA is taking a strong position on cryptoasset advertising, releasing both online guidance and a statement on cryptocurrency advertising in November 2021, noting that they consider this area of advertising to be a “red alert” priority issue.
Given the ongoing spate of cryptocurrency rulings and uncertainty around cryptoasset regulation, there is no doubt that this is a continuously developing area.
What is the impact of the ASA’s latest rulings on cryptoasset ads, and how should advertisers continue to advertise cryptoassets going forward?
1. If in doubt, beef up your disclaimers – and explain that crypto is generally unregulated
The rulings stated that many of the disclaimers in the ads did not have sufficient information regarding the risk of investing in cryptocurrencies. Additionally, the ASA thought that many of the ads downplayed the complexity or risk of investing in cryptoassets. Given that the ASA views cryptoassets as a relatively new type of financial product and that consumers are unlikely to be familiar with the ins and outs of such products, advertisers should take extra steps to make all the risks clear to consumers. For example, advertisers may want to explain that the consumer’s capital may be at risk, as the value of cryptoassets may fluctuate.
Furthermore, the rulings also emphasised the need to state in the ad that many crypto products and markets are unregulated. Because these products and markets are unregulated, consumers may not be protected by government compensation and regulatory protection schemes that would normally be available for other financial products. The ASA made it clear in several of the rulings that this information should be stated upfront in the ad.
Even if the company is otherwise regulated by the Financial Conduct Authority (FCA), the ad should not give the impression that cryptocurrency services are also regulated. Coinbase, in a ruling related to an ad it had place, explained it held numerous licences, including one from the FCA. However, while a company could be regulated by the FCA, cryptocurrency services in general were not. The ASA concluded its ad was misleading because it should have been clear to consumers that cryptocurrency services and cryptocurrency are generally unregulated.
Key takeaway: The ASA is cracking down on disclaimers. It is wise to ensure the disclaimers contain the crucial information on the risks of investing in cryptoassets and on the fact that cryptocurrency services in general are not regulated.
2. But it’s not just about the words you use – be careful around using promotions
The Exmo Exchange ruling involved an ad which stated consumers could “Get $100 advanced cashback FREE!“. The ASA considered that this was a strong incentive for consumers to invest in cryptocurrency, and that the use of a cashback promotion to encourage investment would likely trivialise what the ASA considered could be a risky and costly financial decision. As a result, the ASA said that this took advantage of consumers’ inexperience or credulity, which is a breach of the financial product rules in the CAP Code.
Key takeaway. If the ad includes promotions and offers, care should be taken to ensure that they do not inadvertently trivialise the risks of investing in cryptoassets.
3. Consider whether to include a disclaimer that certain fees are applicable
An ad by the cryptocurrency exchange Luno stated that consumers could “invest for as little as £1” in cryptocurrency. While the ASA also considered that the ad failed to illustrate the risk of investment and that it took advantage of consumers’ inexperience or credulity, it also stated that the ad should have said that fees for buying and selling cryptocurrency were applicable. In the context of an ad that focused on the low price of investing in cryptocurrency, the ASA considered that information about buying and selling fees was material information for consumers and should have been included.
In another example, an ad by Crypto.com stated “Buy Bitcoin with credit card instantly.” The ASA thought the ad excluded important information, such as the possibility that purchases via credit cards could be subject to a higher cash interest rate or a cash advance fee in certain cases, which could have an impact on future borrowing. Some credit card issuers also did not allow users to buy cryptocurrency. Given these points, the ASA considered this information was material to consumers and should have been included in the ad.
Key takeaway. Put disclaimers in the ad or one click away on the landing page, and consider whether they need to mention any applicable fees.
4. Even if there is no direct financial risk to the consumer, the ad still might be caught out
The rulings on Papa John’s and Skrill, a digital wallet provider, made clear that, even if taking advantage of an advertised promotion does not involve direct financial risk to the consumer, it could still be subject to the requirements typically imposed on cryptocurrency ads by the ASA.
For instance, the Papa John’s ad included a promotion to encourage consumers to set up an account with Luno by offering the consumer £10 worth of Bitcoin from Luno if consumers spent £30 with Papa John’s. Papa John’s argued that consumers had the option to cash out at any time and there was no obligation to further trade or invest any of their own money, and therefore claimed it was risk-free.
However, the ASA nonetheless considered that this would still have required consumers to set up an account with Luno. Opening a cryptocurrency exchange account on Luno would give consumers the option to trade in cryptocurrencies with the promotional amount or the consumer’s own money. Accordingly, the decision to open a cryptocurrency exchange was one that the ASA said should require careful thought and consideration, and that the use of pizza to promote the opening of such account trivialised or downplayed the decision to invest in cryptocurrency.
Key takeaway. The requirement of opening a cryptocurrency exchange account to take advantage of the promotion is enough for an ad to be subject to the ASA’s cryptocurrency requirements.
5. Ensure your disclaimers are clearly visible
Even if the disclaimers are watertight, they should still be easily visible by consumers viewing the ad. For example, in a ruling relating to Coinburp, consumers had to scroll “a long way” to view the disclaimer. The ASA considered that this disclaimer was likely to be missed and therefore the ad was misleading.
Key takeaway. There disclaimers with material information are concerned, these should be easily visible by consumers. For example, the text should be sufficiently large enough and be on-screen for adequate periods of time when it comes to animated ads.
6. Consider referencing the potential need to pay capital gains tax
In an unexpected move by the ASA, many of the rulings also said the advertiser should have made clear that Capital Gains Tax (CGT) could be paid on any return on or increase in the value of the crypto investments. Given the relative novelty of crypto investing, the ASA considered that consumers may not be aware that gains may be subject to CGT and, therefore, this should be stated in the disclaimer upfront as well.
This is a relatively new requirement which may put many current cryptocurrency ads in breach of the The UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code).
Key takeaway. Ensure your ad makes reference to the potential need to pay CGT on cryptocurrency gains.
7. Even if you don’t promote your tokens as investment products, they could still be caught.
The ruling regarding Arsenal Football Club involved “Fan Tokens” that could be redeemed for access to a specific product or service, such as allowing fans to interact with the club or vote on official club decisions. Importantly, obtaining fan tokens first required purchasing the cryptocurrency Chiliz. The ad itself did not refer to the tokens as cryptocurrency investments and instead referenced how the tokens could be used to help influence club decisions. Arsenal members would also receive one free fan token each.
Arsenal argued that the fan tokens were utility tokens that encouraged fan participation and were different to usual cryptocurrencies. However, the ASA still considered that this was a cryptoasset because the FCA had categorised utility tokens as cryptoassets – and this was the case regardless of how the product was being promoted. The ASA also said that the decision to open a cryptoasset exchange account, with the possibility of investing in the product, should be taken with care and consideration. As a result, the ASA ruled that the ads trivialised and downplayed the risk of investing in cryptoassets.
The ASA also added that because the fan tokens had to be bought by purchasing the cryptocurrency Chiliz, this was material information and it was omitted from the ad.
Key takeaway. If the product is a cryptoasset, regardless of how it is promoted, the ad in question will be subject to the requirements for crypto ads. Furthermore, it is material information that obtaining the product requires purchasing another cryptocurrency, and should be stated upfront.
8. Ensure that all claims are substantiated.
An ad by Crypto.com stated “Earn up to 3.5% p.a”, and the number in the text then increased to “8.5%”. Crypto.com said these were not forecasts or projections, but instead rewards that a consumer could achieve by transferring their assets from their cryptocurrency wallet to Crypto.com’s tool. However, the ASA upheld its ruling against this ad for two main reasons: the basis used to calculate the figure in the claim was not clear and they said Crypto.com could also not substantiate this rate with robust documentary evidence.
Key takeaway. If referring to rates in the ad, it must be clearly described so consumers can understand the basis for the rates. Advertisers should be ready to substantiate any objective claim it makes about the stated rates.
Why this matters:
This is a complex and evolving area and is also high on the ASA’s enforcement list. We recommend keeping a close eye on regulatory developments when it comes to cryptoassets, as advertisers could otherwise get caught out.