February 5, 2023

New Advertising Rules Require Crypto Investment Warning Label

Advertising Regulatory Board (ARB) in South Africa introduced new ruleswarning crypto investors about the possibility of capital loss.Cryptocurrency advertising should be simple and understandable for the target audience and give a balanced view of the profitability, features, benefits and risks associated with the product or service. Industry members hope this will make it harder for scams such as Mirror Trading International, which promised a yield of 10% per month.

According to the new rules:

  • advertisements must be supported by appropriate justification for how they were calculated.
  • Advertising should clearly state that investing in crypto assets can lead to loss of capital, as their value is volatile and can both rise and fall.
  • “Advertise for crypto asset service providers thatare not registered credit providers should not encourage the purchase of crypto assets on credit. This does not exclude advertisements providing information about payment methods offered by crypto asset service providers.”
  • Another new rule concerns powerful peopleor ambassadors, which are often used to promote a crypto asset product or service. They can only share factual information and cannot give advice on trading or investing in crypto assets, or make promises regarding the benefits or profits from investing.
  • ARB was created by the industrymarketing and communications to protect consumers through self-regulation of advertising, including packaging. “The rules of ethical advertising are non-negotiable for us as an industry,” says Marius Reitz, general manager for Africa at crypto exchange Luno, who led the project. We do not want unscrupulous advertisers to make statements that mislead vulnerable consumers about the reality of crypto investments.”

    “This is not only beneficial for consumers, but also forcompanies that comply with these codes. The data shows that responsible advertising helps companies build better relationships with customers, increasing trust, loyalty and ultimately customer retention.” ARB's decision to specifically include cryptocurrencies in its advertising standards is welcome as it lays the foundation for better consumer protection.