While South African-based crypto exchanges have widely welcomed the Advertising Regulatory Board’s (ARB’s) addition of a new clause that deals with crypto-currency products to the Code of Advertising Practice, they say the effectiveness of the move remains to be seen.
The new rules are aimed at protecting consumers from being misled by unethical advertisers, and are the result of consultation and agreement with the crypto-currency industry.
According to David Porter, GM of AltCoinTrader, this addition was an industry-led initiative spearheaded by exchanges Luno, AltCoinTrader, VALR, Revix and Ovex.
“The driving factor behind the initiative was to introduce an ethical industry standard for firms advertising crypto services, while ensuring investors are made aware of the risks of getting involved in this industry,” he says.
“There is a lot of hype around crypto assets − particularly in bull market conditions − and it’s important that even in these conditions, the risks are articulated clearly and customers know what they are getting themselves into,” says Gail Schimmel, CEO of the ARB.
“This is a wonderful example of an industry that sees the harm that could be done in its name, and steps up to self-regulate the issues without being forced to do so by government. This has been an exciting project and we know that it will result in better protection for vulnerable consumers.”
Curbing crypto crooks
“Rules around ethical advertising are non-negotiable for us as an industry,” says Marius Reitz, GM for Africa at Luno.
“We don’t want rogue advertisers making claims that mislead vulnerable consumers about the reality of crypto investment. It is important to us that consumers enter this exciting market with their eyes open and their expectations realistic.”
Porter explains that an advertising code marginalises unscrupulous firms that don’t adhere to, or operate outside of, the parameters of the code.
He adds that investors looking to get exposure to crypto assets appreciate the fact that the risks are articulated and it builds trust in the firms and brands that do adhere to the code.
However, Porter notes the effectiveness of this code in curbing unscrupulous advertising remains to be seen.
“It’s one thing for all the big local players to adhere to the code, but those players aren’t the ones guilty of unscrupulous advertising to begin with.
“We have merely codified business and advertising practices we collectively deem to be ethical. The bad actors may just continue to advertise in an unethical manner, promising unrealistic returns, and we would encourage the public to do due diligence on any crypto firms they are thinking of using.”
A Binance spokesperson tells ITWeb: “We acknowledge and fully support the new clause to South Africa’s Advertising Regulatory Board Code of Advertising Practice dealing with crypto-currency products. Any rules that aim to protect customers and set clear standards for advertising can only be good for our industry.
“Binance works hard to enable our teams to run brand-friendly, user-focused and fully-compliant marketing campaigns. We follow the local laws of each country in which we are marketing.
“We have a strong commitment to user protection, ensuring consumers are adequately protected and informed regarding crypto-currency. We remain committed to working with regulators and policymakers to shape policies that protect consumers, encourage innovation and move our industry forward.”
Exploring the new clause
In a statement yesterday, Luno says the new clause is clause 17 of Section III, and the full text is as follows:
17.1 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 wording should be, or should communicate the same, as the following example:
- Investing in crypto assets may result in the loss of capital.
17.2 Advertisements must comply with Clauses 2 and 4.2.1 of Section II. In particular:
17.2.1. The overall message of the advertisement must not contradict the warning statements set out in Clause 17.1 above.
17.2.2. An advertisement for a particular crypto asset service or product must explain the relevant product or service in a way that is easily understandable for the intended target audience.
17.2.3 Advertisements must give a balanced message about the returns, features, benefits and risks associated with the product or service.
17.2.4 Rates of return, projections and forecasts must be supported by adequate substantiation that complies with the requirements of Clause 4.1 of Section II. It must be communicated how any rate of return, projection or forecast is calculated and what significant conditions apply.
17.2.5 Information presented about past performance must make it clear that the past performance is not indicative of future performance. Any historical period or past performance should not be presented in such a way that it creates a favourable impression of the advertised product or service.
17.3. Advertisements by crypto asset service providers who are not registered credit providers should not encourage the purchase of crypto assets on credit. This does not preclude advertisements providing information about the payment methods offered by crypto asset service providers.
17.4. Where influencers or ambassadors are used to promote a crypto asset product or service, the requirements of Appendix K must be complied with. In particular, the influencer or ambassador may share factual information only. Influencers and ambassadors may not offer advice on trading or investing in crypto assets and may not promise benefits or returns.
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