South Africa’s Advertising Regulatory Board (ARB) has included a new clause for the crypto industry to protect investors from unethical advertising.
As per the newly added clause in Section III of the country’s advertising code, companies and individuals in South Africa must abide by specific advertising standards about the provision of crypto products and services.
The first clause requires that the advertisers, including the crypto offerings, must “expressly and clearly” state that investments may result in the gradual loss of capital “as the value is variable and can go up as well as down.” In addition, the advertisements must not contradict warnings about potential investment losses.
Sources reveal that the new clause also highlights that advertising for particular services and products must be explained in an “easily understandable” manner for the potential audience. The advertisers must also give balanced messages around returns, features, benefits, and risks associated with products or services.
The rates of returns, projections, or forecasts must also be adequately substantiated, including how these are calculated and what conditions apply to touted returns. Any information relating to past performance cannot be used to promise future performance or returns and should not be presented in a way that creates “a favorable impression of the advertised product or service.”
According to the clause, advertisers of crypto service providers, not registered credit providers, should not encourage the acquisition of cryptocurrencies using credit. However this does not preclude the advertising of associated payment methods provided by service providers.
The clause also mandates that social media influencers and brand ambassadors will be expected to comply with certain advertising standards. It also includes being required to share factual information while prohibited from offering advice on trading or investing in crypto assets and denying promises of benefits or returns.
An executive of a crypto firm shared his positive outlook on the new clause and said that the industry is looking to take a self-regulatory approach and that consumers should be cognizant of the risks involved in cryptocurrency investing. Scams and frauds have preyed on unsuspecting investors in the country, necessitating an effort to ‘clean up the industry’ by making it more difficult for scammers to operate.
Marketing and advertising have become an essential topics of concern for regulators across the globe. In October, the Australian Securities and Investments Commission (ASIC) revealed that BPS Financial Pty Ltd (BPS) Financial had been subject to civil penalty proceedings for making “deceptive representations” to its 79,000 customers concerning its token.
Similarly, regulators in the United States closely monitor advertisements relating to cryptocurrencies. Juliana Gruenwald, the U.S. Federal Trade Commission (FTC) spokesperson, briefed a publishing house on the organization’s approach to advertisements in the sector.