Advertising is the fundamental promotional strategy for any business that wants to bring its product to the mass market. As such, crypto ads play a major role in driving the awareness, adoption, and popularity of digital assets across the globe.
The popularity and adoption of cryptocurrencies have exploded in recent years. As the interest and use cases of such decentralized digital assets grow, more and more new tokens continue to arise in this promising sector. The fear of missing out is driving companies and individuals alike to capitalize on this digital gold rush. But along with the profits come the concern with crypto regulations and advertisement bans.
However, as the potential for the vast wealth and groundbreaking disruption draws more players into the arena, concerns regarding the lack of transparency, rampant fraud, and misleading advertisements have prompted regulators across the globe to step in. The rapid proliferation of deceptive Initial Coin Offerings (ICOs) and cryptocurrency product promotions has sparked a contentious debate over whether advertising for these products should be banned altogether.
This article delves into the intricacies of cryptocurrency advertising, exploring the rationale behind regulating crypto ads, the reasons why initial coin offering promotions are prohibited in some jurisdictions and the countries that have chosen to either support or ban these ads. We also examine some of the most notorious instances of banned crypto ads in recent years, shedding light on the complex and evolving relationship between the cryptocurrency industry and the global advertising landscape.
Why are crypto ads being regulated and monitored by watchdogs?
As the crypto and blockchain space is largely decentralized, there are no boundaries of the type of projects, groups, and organizations that can emerge in this sector. Anonymity is one of the core traits of this sector, so much so that we still don’t know who the Bitcoin pioneer Satoshi really is. More often than not, this anonymity is leveraged by malicious groups to exploit users in this new and rather booming digital assets market. As pioneers venture into this uncharted territory, the lack of regulation has led to a proliferation of potentially lucrative but risky investment opportunities. Crypto ads, as the primary marketing tool for these novel financial instruments, have become the subject of scrutiny, prompting the need for regulation.
One of the reasons why watchdogs are hellbent on regulating cryptocurrency advertisements is because of the high likelihood of fraud and deceptive marketing tactics. Much like the Wild West era, where lawlessness and opportunistic gold prospectors abounded, the crypto landscape is teeming with unscrupulous actors seeking to take advantage of eager, yet inexperienced investors. Regulating ads helps to mitigate the risk of unsophisticated investors falling prey to scams, like pump-and-dump schemes, where the value of a token is artificially inflated only to be sold off at a high point, leaving unsuspecting buyers with worthless coins.
In addition, the volatility of the cryptocurrency market has necessitated the regulation of ads to ensure they do not make misleading or overpromising claims about potential returns. Just as pharmaceutical advertisements are closely monitored to prevent the dissemination of false or exaggerated claims about their products’ efficacy, crypto ads must also be held to a standard that protects consumers from misinformation.
Lastly, regulatory oversight of crypto ads serves to bring the burgeoning industry into compliance with existing financial regulations, such as Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements. By doing so, regulators aim to thwart the illicit use of cryptocurrencies for nefarious purposes, much like the vigilant watchman guarding a bank vault to protect its valuable contents from criminals.
Cryptocurrency advertisement regulations around the world
UK Regulations
The Advertising Standards Authority (ASA) in the United Kingdom has designated advertising of crypto assets, cryptocurrencies, and NFTs as a “red alert priority issue” and has issued multiple decisions on crypto commercials that violated the CAP Code. The ASA is concerned about a lack of proper risk warnings, the trivialization of cryptocurrency investments, taking advantage of customers’ inexperience or skepticism, and irresponsible advertising that generates a sense of haste to invest. The verdicts have emphasized the need to give clear risk warnings and not deceive investors about the future potential of their investments.
The UK government plans to legislate to address misleading crypto asset promotions and bring them in line with other financial advertising regulations. The new rules aim to increase consumer protection while encouraging innovation.
Crypto advertisement regulations in North America
In the United States, the Securities and Exchange Commission (SEC) has been actively cracking down on fraudulent initial coin offerings (ICOs) and has issued warnings to investors about the risks associated with cryptocurrencies. The SEC requires that all cryptocurrency-related advertisements be truthful and not misleading and that they comply with all applicable laws and regulations.
The Canadian Securities Administrators (CSA) first issued guidance in 2018 that outlines how securities laws apply to cryptocurrencies and ICOs. The guidance includes information on how to comply with securities laws when promoting cryptocurrencies or ICOs, and warns that misleading or fraudulent advertising could result in fines or other penalties.
Regulations in Asia and Pacifics
In Asia, Japan has led the frontline in establishing strict regulations on crypto advertising. The Financial Services Agency (FSA) has implemented strict regulations on cryptocurrency exchanges and requires them to register with the government. The FSA also requires that all advertisements for cryptocurrencies be truthful and not misleading and that they provide clear information about the risks associated with investing in cryptocurrencies. Similarly, the Australian Securities and Investments Commission (ASIC) has issued guidance on the regulation of cryptocurrencies and ICOs. The ASIC requires that all cryptocurrency-related advertisements be truthful and not misleading and that they comply with all applicable laws and regulations.
Overall, the regulation of cryptocurrency advertising is a complex and evolving issue, with different countries taking different approaches. In addition, companies like Google have their own policies that restrict certain types of crypto advertising, such as those related to DeFi trading protocols. As the crypto market continues to grow, it is likely that we will see more regulation in this area to protect investors and prevent fraud.
Google’s ban on DeFi and cryptocurrency ads
Google has had a somewhat complex relationship with crypto advertising over the years. In 2018, the company banned all ads for cryptocurrencies and initial coin offerings (ICOs), citing concerns about consumer protection and the potential for fraud. However, in 2019, Google lifted this ban and allowed some crypto-related ads to run on its platform as long as the advertiser was registered with the Financial Crimes Enforcement Network (FinCEN) as a money services business.
Despite these changes, Google has maintained some restrictions on crypto advertising. For example, ads for ICOs, wallets, and trading advice are still banned. In addition, as per Google’s latest policy revision, any advertisements pertaining to “DeFi trading protocols” are still prohibited. This is somewhat surprising, given the growth of the decentralized finance (DeFi) market, which currently has a total locked value (TVL) of around $46 billion.
Google’s restrictions on crypto advertising are likely intended to protect consumers from fraud and other risks associated with cryptocurrencies. However, they can also limit the ability of legitimate crypto-related businesses to reach potential customers. As the crypto market continues to evolve, it remains to be seen how Google’s policies will adapt to these changes.
Notable banned crypto ads
Papa John’s Bitcoin ad
On their website and in a tweet, the Papa John’s pizza chain promoted an offer for “free Bitcoin worth £10” and a discount of £15 on orders of £30 or more, along with £10 worth of Bitcoin from Luno. This promotion was part of the company’s annual celebration of “Bitcoin pizza day,” which commemorates the first-ever Bitcoin transaction that took place in May 2010 when two Papa John’s pizzas were purchased for 10,000 Bitcoins.
Despite the huge financial implications of the initial Bitcoin transaction, Papa John’s stated that their promotion did not make any claims about cryptocurrency or its suitability as an investment. They argued that the offer of “free” Bitcoin was different from a scenario where a consumer was given the opportunity to invest their own money in a financial product.
The Advertising Standards Authority (ASA) in the UK has taken a strict stance on crypto-related ads and has flagged several concerns, including the lack of appropriate risk warnings, the trivialization of investments in cryptocurrency, and irresponsible advertising that creates a sense of urgency to invest. Papa John’s promotion could have potentially breached these regulations, although it is unclear whether the ASA investigated the promotion.
Banned Papa John’s Bitcoin ad from 2021
Crypto.com advertisement
Popular exchange Crypto.com was challenged by the Advertising Standards Authority (ASA) on an advert placed in the Daily Mail app in September 2021 that included the text “Buy Bitcoin with credit card instantly”.
A second ad placed in July in the Love Balls mobile game app included the text “earn up to 3.5% [per annum]”, a figure that later increased to 8.5%.
The ASA upheld all five of its challenges to the two Crypto.com ads. It said the adverts failed to make clear the risk of cryptocurrency investments, took advantage of consumers’ inexperience and failed to make clear the limitations of purchasing cryptocurrency with a credit card.
It also said the claim that consumers could “earn up to 8.5%” was “misleading and could not be substantiated”.
Coinbase ad
Coinbase, a popular cryptocurrency exchange, faced criticism from the Advertising Standards Authority (ASA) over a paid Facebook advertisement. The ad stated that investing £5 in Bitcoin in 2010 would be worth over £100,000 in January 2021, and urged viewers not to miss out on the next decade by signing up for Coinbase. The ad also mentioned that users could buy Bitcoin in as little as 5 minutes with a minimum investment of £25, and used the word “unregulated.”
In its ruling, the ASA found that the ad was misleading because it implied that there would be a similar guaranteed increase in the value of Bitcoin over the next decade. The ad did not make it clear that past performance was not necessarily indicative of future results. The regulatory body’s decision underscores the importance of providing accurate and transparent information in cryptocurrency advertising, particularly with regards to potential returns and associated risks.
The TFL ‘time to buy’ ad
Luno, a cryptocurrency exchange service, faced backlash from the Advertising Standards Authority (ASA) in the UK over an advertising campaign that encouraged people to buy Bitcoin. The campaign featured posters with a cartoon image of Bitcoin and the words “If you’re seeing Bitcoin on the Underground, it’s time to buy.” These posters were displayed across the London Underground network and on London buses in 2021.
The ASA ruled that the ads were irresponsible and misleading and failed to highlight the risks associated with investing in cryptocurrency. The regulatory body ordered Luno to cease using the ads in their current form. This ruling emphasizes the importance of providing clear and accurate risk warnings in cryptocurrency advertising, especially as the market continues to grow in popularity.
LUNO’s controversial ad displayed in London Tube stations.
Conclusion
The rapid ascent of cryptocurrencies and the unrelenting appetite for novel investment opportunities have given rise to a new frontier in digital finance. However, the increased prevalence of misleading advertisements, fraudulent ICOs, and questionable cryptocurrency products has necessitated the implementation of regulatory measures to safeguard consumers and maintain the integrity of the industry.
As the cryptocurrency ecosystem continues to evolve, it is imperative for regulators, industry players, and consumers to work together in navigating this uncharted territory. Establishing a more transparent and secure environment, striking the right balance between innovation and consumer protection, and fostering a shared understanding of the importance of responsible advertising will ultimately determine the future of this groundbreaking financial technology. Only by traversing this delicate tightrope can the true potential of cryptocurrencies be realized, allowing them to flourish as a legitimate, transformative force in the global financial landscape.
