On 15 December 2021 the Advertising Standards Authority (ASA), the UK’s advertising regulator, published seven rulings concerning breaches of the UK marketing rules (in particular, the CAP Code) by companies involved in the promotion of cryptocurrency assets. The unprecedented number of rulings in a single day published by the Authority sends a strong statement that the crypto advertising area will indeed be a “red alert” priority for the watchdog, as promised in late November. DAC Beachcroft’s specialist Blockchain and Cryptoasset team has summarised each of the rulings below, and set out a few valuable takeaways for companies involved in crypto marketing.
The ASA’s general approach
The published rulings have two common aspects:
- All adverts (except Papa John’s) have been found to be misleading because they failed to sufficiently illustrate the risk of investment in cryptocurrency (Rules 3.1 and 3.3 of the CAP Code); and
- All advertisers were socially irresponsible because their adverts took advantage of consumers’ inexperience or credulity (Rules 1.3 and 14.1 of the CAP Code).
An interesting feature of the seven rulings is that they encapsulate seven different advertising mediums – all of which within the digital space. While a quick skim of ASA’s rulings over the past year shows an even split between decisions on digital and non-digital adverts, the seven-to-nil proportion in Wednesday’s rulings shows just how fundamental the digital space, and social media in particular, has proven to be in the promotion of crypto trading. The rulings did not cover any TV or radio broadcasted adverts, which are instead covered by the CAP Code’s “sister” regime - the BCAP Code.
The individual decisions
1. CoinBurp (Twitter bio)
In this case, cryptocurrency trading platform Coinburp’s Twitter page included a bio section which stated “Register in minutes, deposit instantly, then make super-easy and secure crypto trades”, and did not contain any warnings or disclaimers to consumers.
During the ASA investigation, CoinBurp pointed out that the Twitter bio would only be visible to users who clicked to access their page, and it therefore expected that the individuals accessing the page were likely to already have some understanding of cryptocurrency. They also pointed out that the 160 character restriction for Twitter bios prevented them from listing all risks of crypto investments but did direct consumers to the website and app.
In response to those submissions, the ASA ruled that the fact that some consumers may have an interest in cryptocurrency in general, did not automatically mean that they had more knowledge or experience with cryptocurrencies than the general public. The Authority also pointed out that the Twitter bio made no reference to the fact that capital was at risk or that Capital Gains Tax (CGT) could be paid on cryptocurrency profits, which would have been unknown to the general public. While the 160-word Twitter restriction was noted, the ASA pointed out that it would have been possible to include a qualification in the image at the top of the Twitter page, or within the Linktree page, “sitting” between the Twitter bio and the CoinBurp’s website.
2. Exmo (third party YouTube video)
The case concerned a YouTube video by an influencer, which included a section which stated “Today’s video sponsor is Exmo, a cryptocurrency exchange … If you are like me and new to the whole idea, Exmo is a great place to start your trading journey. You see Exmo doesn’t bamboozle you with a million charts or expect you to be a trading whizz. The nice clear simple trade tab is designed specifically for people who buy crypto for the first time”.
In response to the ASA’s challenge on the lack of mentioning of CGT liability, Exmo responded that their target audience, retail customers, were unlikely to trade in such volume that their profits would exceed the £12,300 investment income threshold above which CGT becomes payable. The ASA was unimpressed with the argument and upheld its challenge. Interestingly, while the original complaint was against both Exmo and the YouTube influencer, ASA’s recommendations in the ruling only concern the former.
3. eToro (third party website ad)
The advert in question was shown on the Yahoo! Finance website and included text which stated “Invest in the world’s top crypto’s with one click”, and “Discover eToro’s unique BitcoinWorldwide offering, a ready-made portfolio, holding the world’s leading cryptoassets”.
In response to the ASA’s challenge for misleading and irresponsible advertisement (common to six of the seven rulings), eToro explained that the term “one click” referred to the efficiency of having a ready-made diversified cryptoasset portfolio, and it wasn’t a comment on the simplicity of the cryptocurrency. As with Exmo, the ASA also flagged eToro’s failure to mention CGT. The company put forward the argument that as a global platform, CGT would have been irrelevant for any non-UK consumers.
The Authority disagreed with both points, noting that the article was published on Yahoo! Finance’s UK page, and was therefore targeting British consumers.
4. Luno Money (third party app ad)
In this instance, an in-app ad for cryptocurrency exchange service Luno seen within the Daily Mail Online app included text which stated “Invest in crypto for as little as £1”.
In addition to the other aspects of the ASA’s challenge raised in all seven complaints, the watchdog specifically noted that the Luno advert did not flag to consumers that fees for buying and selling cryptocurrency were applicable. It is interesting to note that this is the second decision by the Authority against Luno Money, who fell foul of the CAP Code in May this year for posters on the Transport for London network.
5. Kraken (digital poster on London Underground)
The matter concerned a digital poster for Kraken, an online cryptocurrency exchange, at London Bridge station. The 20-second ad began with a 394 character long (71 words) statement on the risks involved in investing in cryptocurrency, which ran for 1 second. The ad then ran for 19 seconds and included text which stated “Kraken” and “Buy Bitcoin & Crypto”.
The Authority ruled that the ad presented the consumer with a large amount of information that, even if managed to be seen by a passer-by, would not be fully read or understood. It therefore considered that due to the presentation and brevity of the risk warning, consumers would not have the necessary time to comprehend the disclaimer in full.
6. Papa John’s (own website and Twitter post)
This ruling related to a campaign by Papa John’s, the famous pizza delivery brand, in which customers were promised “FREE BITCOIN WORTH £10” via Twitter posts and adverts on the Papa John’s website. The campaign was part of Papa John’s annual #BitcoinPizzaDay and allowed users to use a promotional code to sign up for a Luno account (see no. 4 above) that contained £10 worth of Bitcoin.
Unlike the other adverts, the ASA did not find this one misleading. However, it did nevertheless rule it to be socially irresponsible because it took advantage of consumers’ inexperience or credulity, and trivialised investments in cryptocurrency.
7. Coinbase (Facebook ad)
The final decision concerns a paid-for Facebook ad for Coinbase, a cryptocurrency exchange platform, seen on 27 July 2021. The advert included text which stated “£5 in #Bitcoin in 2010 would be worth over £100,000 in January 2021. Don’t miss out on the next decade – get started on Coinbase today”. In addition, under the heading “Coinbase”, a list of bullet points included text which stated “Simple and easy to use”, “Never been hacked” and “Trusted”. Under the heading “The Competition”, a list of bullet points included text which stated “Unregulated”.
In this instance, the ASA found two additional violations of the CAP code which are not applicable in the other rulings.
Firstly, the watchdog noted that while a company may be regulated by the Financial Conduct Authority (FCA), cryptocurrency services in general were not. It considered that consumers would assume that regulation, in the context of an ad for a cryptocurrency product, would mean that the company and the specific cryptocurrency services they advertised were regulated by the FCA, which was a misleading claim.
Moreover, the statement that “£5 in #Bitcoin in 2010 would be worth over £100,000 in January 2021” did not make clear that past performance or experience did not necessarily give a guide for the future. This falsely implied a guaranteed income and was also ruled to be misleading to consumers.
Key takeaways for companies involved in crypto marketing
All seven decisions show that the protection of customers in the growing cryptocurrency trading market is firmly on the ASA’s agenda. The rulings provide useful guidance on the watchdog’s expectations for advertisers:
- Responsibility. Irrespective of the advertising medium, it is the Promoter (the entity whose goods or services are being marketed) who bears the main responsibility of complying with the CAP and the BCAP Codes. Accordingly, where you are at “an arm’s length” in a promotion (e.g. where it is run through an influencer or organised by a marketing agency) ensure that your contracts contain the necessary protections.
- One click away? The “one click away” rule mandates that not all terms and conditions of a Promotion need to be included in an advert, as long as there is a reference to a source which contains them. To make use of this rule, the terms should really be “one” click away, especially where they are considered to be key. Consider using disclaimers in your Twitter or Facebook cover photos to include key terms and conditions relevant to your service or goods.
- Consumer sophistication. When targeting consumers interested or trading with cryptocurrencies (and other blockchain technology such as NFTs) advertisers should not imply that those targeted individuals are in any way more sophisticated in the subject matter than the general public.
- Jurisdiction-specific issues. Where a campaign targets the users in a specific geographical market, the terms and conditions should contain market-specific disclaimers, for example the applicability of certain taxes.
- Platform and transaction fees. The fees applicable to crypto trading, to include transaction and exchange fees, are likely to be considered “key terms” and should be included in all marketing materials.
- Legal advice. Always seek legal advice when using terminology implying or stating that your business is “regulated”. Our Regulatory colleagues have extensive experience advising entities in niche financial regulatory matters involving the FCA and other authorities, and our specialist Blockchain and Cryptoasset Team advises on the full spectrum of issues related to cryptocurrency, NFTs, and smart contracts, including advertising.
DAC Beachcroft’s Technology and Media lawyers advise some of the world’s leading businesses in this sector, and our team has a breadth of expertise in the cryptocurrency and NFT advertising space.
For more information on our cryptocurrency and NFT legal advisory offering, or in respect of advertising law and regulation, please contact Tim Ryan or Kelsey Farish and check out our Technology and Media team’s Collection on blockchain and cryptocurrency matters.
