On Monday 23rd January 2023, the Advertising Regulatory Board of South Africa (ARB) released updated guidance for Advertising in the cryptocurrency sector. The new provision aims to protect the South African public from unethical advertising and ensures maximum transparency.
The Advertising Practice Code requires all advertisements for crypto assets to clearly and explicitly state that an investment in crypto assets may result in a loss of principal because the value is inherently variable and volatile.
Thus, asset advertisements for cryptocurrencies must directly state that “investment in Crypto assets may result in loss of principal.”
Cryptocurrency assets are often viewed as high-risk, high-reward opportunities. The updated ARB Guidelines aim to facilitate clearer communication from crypto projects to the public. The ARB maintains that crypto advertising needs to inform the public that they are likely to face significant losses due to the volatility inherent in the cryptocurrency markets.
The fall of the arbitrary operator in the cipher
According to the updated crypto advertising requirement, social media influencers and brand ambassadors must comply with advertising standards when promoting cryptocurrency products and services.
Updated ARB regulations require influencers and ambassadors to only share factual information. Furthermore, they are prohibited from giving advice on trading or investing in crypto assets or guaranteeing benefits or returns.
The discussion around crypto advertising regulations has become more prominent in the space after several incidents where the public was exposed to misinformation. Reality TV star Kim Kardashian has been charged over a million dollars by the Securities and Exchange Commission (SEC) to promote the EthereumMax (EMAX) scam project.
In a separate instance, Madonna, Jimmy Fallon, and Future were among the celebrities The target of a class action lawsuit Regarding Yuga Labs (creators of Bored Ape Yacht Club) and Moonpay NFT marketing campaigns. The aforementioned entities have been accused of using celebrities to promote and sell NFTs by misleading investors.
The decision by South African regulators to crack down on crypto advertising regulations was allegedly influenced by the 2021 Steinberg scandal. Johann SteinbergMTI CEO, They fled the country With 23,000 BTC withdrawn from thousands of investors after “running a fraudulent commodity pool”.
The lack of guidelines and regulations has so far led to many incidents where the public has been misled with false or misleading information. In this way, ARB Bank hopes to avoid a recurrence of such events in the future through stricter regulation.
The correct way to advertise crypto assets
According to ARB guidelines, a cryptographic declaration must comply with all relevant regulations and consist of the following basic requirements:
- Encrypted ads should be easy to understand by the intended target audience.
- Balanced messages about returns, features and benefits should be communicated.
- Adequate proof of rates, returns and projections must be provided.
- Crypto ads must not encourage the purchase of crypto assets or promise any benefits or returns.
- Crypto ads must indicate that crypto assets are volatile and can lead to loss of investment.
- The aggregate messages must comply with the warning statements.
- Past events and offers may not be used to create a positive impression of the advertised crypto assets.
The regulatory update is an effort by the government in collaboration with ARB Bank to protect consumers from potential fraud or misinformation related to crypto assets.
Protecting the public in South Africa
“The new rules are aimed at protecting consumers from being misled by unethical advertisers and are the result of consultation and agreement with the cryptocurrency industry.”
Section III of the Crypto Assets Clause states that companies and individuals offering cryptocurrency products and services are required to adhere to specific advertising standards as laid out in the aforementioned document.
Crypto advertisements should clearly state that investments may result in financial loss and present services and products for the target audience to clearly understand. Advertisements for crypto assets must also provide important information about returns, features, benefits, and risks and adequately demonstrate return rates, projections, or expectations.
Furthermore, unregistered credit providers cannot promote the acquisition of cryptocurrencies with credit but they can advertise associated payment methods.
South Africa among Leading countries seeking to regulate cryptocurrencies Publicity to ensure advertising and marketing materials are transparent, accurate and not optimistic in any way that is misleading.
As a developing country, South Africa’s efforts to standardize and regulate cryptocurrency-related advertising indicates an increase in global adoption.