UK promoting watchdog to crack down on deceptive crypto advertising and marketing
The UK advertising regulator said it would crack down on misleading marketing for crypto investments as part of a broader regulatory move to prevent harm to consumers who choose to trade unregulated digital assets.
The Advertising Standards Authority told the Financial Times that it will go to great lengths this month to find and remove misleading or irresponsible crypto advertisements, especially online and on social media platforms.
“We see this as an absolutely critical and priority area for us,” said Miles Lockwood, director of complaints and investigations for ASA. “Wherever we find problems, we will take action hard and quickly.”
He said the agency identified crypto as a “red warning” priority within financial advertising. Corporations are cautioned and may need to include disclaimers in their advertisements.
The advertising industry’s self-regulatory authority is at the forefront of efforts to monitor cryptocurrency advertising as most crypto investments are outside the scope of the UK’s strict rules for promoting traditional financial products, which are audited by the Financial Conduct Authority.
The FCA has issued warnings that consumers buying popular crypto products “should be ready to lose all their money,” but these have not caught on with most consumers.
The ASA criticized the crypto app Luno in May for an advertising campaign on London public transport with the slogan: “If you see Bitcoin on the tube, it’s time to buy.” The watchdog said it was “misleading” and underrated the risks of investing in volatile digital assets like bitcoin.
Marcus Swanepoel, CEO of Luno, said the uncertainty over the UK’s crypto regulatory regime is hampering digital asset companies trying to abide by the rules. “In all honesty, we got the impression that these ads are fine,” he said.
While the advertising industry has largely relied on customer complaints to flag problematic ads, it is now increasing its capacity to proactively search for suspicious ads online using technologies such as web scraping and artificial intelligence. It is also partnering with major technology platforms on a separate initiative to remove fraudulent ads.
“We recognize that there are some types of media that we have not been able to fully address until now,” said Louise Maroney, who heads financial complaints for the ASA.
The ASA’s enforcement push will also scrutinize influencers who play an important role in promoting cryptocurrencies on social media.
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The exclusion of many investments in digital assets from the purview of financial regulators has drawn criticism from consumer advocates. Myron Jobson, Personal Finance Campaigner at Interactive Investor, said the “current regulatory regime for funding crypto assets is astounding” and “poorly modernized.”
He said the Treasury Department should respond quickly to the July 2020 proposals to revise the rules. The proposals “are intended to ensure that” [cryptoassets] to the same high standards of fairness, clarity and accuracy as other financial services, ”said the Treasury Department.
The FCA said it was working closely with the Treasury Department on proposals to expand its powers. The Cryptoassets Taskforce, made up of the Treasury, the FCA and the Bank of England, identified crypto advertising as a major consumer protection concern back in 2018.
“Advertising for crypto assets, which is often aimed at retail investors, is usually not fair or clear and can be misleading. Ads often exaggerate the benefits and rarely warn of volatility risks. . . and the lack of regulation, ”they wrote in a report.
FCA studies have found that only a minority of people buy digital coins based on advertising, but those who do tend to get worse results. “Consumers who are convinced by advertising are much more likely to regret their purchase,” said the FCA.
It also found that people who bought from ads were more likely to mistakenly believe that their crypto investments had regulatory protection.