UK advertising watchdog to crack down on misleading crypto marketing
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The UK’s advertising watchdog said it will clamp down on misleading marketing for crypto investments as part of a wider move by regulators to prevent harm to consumers who decide to trade unregulated digital assets.
The Advertising Standards Authority told the Financial Times it will begin a major effort this month to seek out and take down misleading or irresponsible crypto advertisements, particularly online and on social media platforms.
“We see this as an absolutely crucial and priority area for us,” said Miles Lockwood, director of complaints and investigations at ASA. “Where we do find problems we will crack down hard and fast.”
He said the agency has identified crypto as a “red alert” priority within financial advertising. Companies will be issued with warnings and may be required to include disclaimers on their advertisements.
The advertising industry’s self-regulatory body has been thrust to the forefront of efforts to supervise cryptocurrency advertisements because most crypto investments fall outside the scope of the UK’s strict rules for promoting traditional financial products, scrutinised by the Financial Conduct Authority.
The FCA has issued warnings that consumers buying popular crypto products “should be prepared to lose all their money”, but those have failed to filter through to most consumers.
The ASA in May criticised crypto app Luno over an ads campaign on London public transport with the tagline: “If you’re seeing Bitcoin on the Underground, it’s time to buy.” The watchdog said it was “misleading” and underplayed the risks of investing in volatile digital assets like Bitcoin.
Luno chief executive Marcus Swanepoel said that uncertainty over the UK’s regulatory regime for crypto was hampering digital asset companies that are trying to play by the rules. “Honestly, we were under the impression that these ads were OK,” he said.
While the advertising industry body has largely relied on customer complaints to flag problematic adverts, it is now increasing its capacity to scan proactively for suspect ads online using technology such as web scraping and artificial intelligence. It is also working with big technology platforms on a separate initiative to get scam adverts taken down.
“We do recognise that there are some types of media that we haven’t been able to address fully until now,” said Louise Maroney, who leads financial complaints for the ASA.
The ASA’s enforcement push will also scrutinise influencers, who play an important role in promoting cryptocurrencies on social media.
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The exclusion of many digital asset investments from the financial regulators’ remit has drawn criticism from consumer advocates. Myron Jobson, personal finance campaigner at Interactive Investor, said the “current regulatory regime for the financial promotion of cryptoassets is baffling” and “in desperate need of modernising”.
He said the Treasury should act swiftly on proposals, put forward in July 2020, to revise the rules. The proposals “are designed to ensure that [cryptoassets] are held to the same high standards for fairness, clarity, and accuracy as other financial services”, the Treasury said.
The FCA has said it is working closely with the Treasury on the proposals to extend its powers. The Cryptoassets Taskforce, formed from the Treasury, FCA and Bank of England, flagged up crypto advertising as a key consumer protection concern as far back as 2018.
“Advertising regarding cryptoassets, which is often targeted at retail investors, is not typically fair or clear and can be misleading. Adverts often overstate benefits and rarely warn of volatility risks . . . and the lack of regulation,” they wrote in a report.
FCA research has found that only a minority of people buy digital coins based on advertising, but that those who do so tend to have worse outcomes. “Consumers who are persuaded by adverts are much more likely to regret their purchase,” the FCA said.
It also found that people who bought based on ads were more likely to incorrectly believe that their crypto investments had regulatory protection.