The UK advertising regulator is intensifying its scrutiny of ads for high-risk cryptocurrencies as the sector waits for the Financial Conduct Authority to assume new oversight powers.
The Advertising Standard Authority (ASA) on Tuesday issued an enforcement notice to more than 50 UK companies that advertise cryptocurrencies, setting out its standards for these ads, including warnings against encouraging people to buy crypto with credit cards or to swap their pension for tokens such as bitcoin.
The notice marks an escalation in the ASA’s battle to clamp down on what it has called a widespread problem with “misleading and irresponsible” crypto ads.
Nick Hudson, operations manager at the ASA, said: “It’s definitely a step up. This is a sector that we recognise needs some work, as government has recognised too.”
Rishi Sunak, the chancellor, said in January that the government will seek to change the law to give the FCA new powers to oversee crypto asset promotions, bringing ads for digital assets in line with the stricter standards currently imposed on other financial ads. However, the ASA said it does not expect the new system to be in place before 2023 and warned that unscrupulous operators might try to exploit the delay.
“Our role is really important at this time. Advertisers know the FCA regulation is coming down the track. This is a time when they might want to make hay,” Hudson said.
Mass advertising of high-risk crypto investments has emerged as one of the most urgent priorities for financial watchdogs around the world as they seek to bring the “wild west” of virtual assets under their control.
Research by the FCA last year found that savers who bought crypto after seeing ads were more likely to regret their purchases.
Australian regulators last week launched a lawsuit against Facebook owner Meta over “scam celebrity crypto ads” spread on the social media site. Meta said it tries to block scams but cannot comment on the legal case.
Some countries have taken an even tougher line. Singapore this year banned almost all public transport and social media influencer ads for crypto, while Spain said it will require influencers to notify regulators in advance about crypto posts.
The ASA, which oversees the UK advertising sector, will share responsibility for crypto with the FCA once the financial watchdog assumes its new powers. Crypto joins other industries that have been slapped with ASA enforcement notices, including fertility treatments and prescription weight-loss medicines.
The notice follows a series of rulings targeting crypto ads campaigns that the watchdog said breached UK advertising standards. The agency this month sanctioned Floki Inu, a token named after Elon Musk’s pet dog, for a series of ads on London public transport that the ASA said “exploited consumers’ fears of missing out”.
The regulator last year slapped a number of major crypto providers, including Coinbase and eToro, with formal rebukes over their ads — and pushed back against promotions for football club Arsenal’s “fan tokens”.
Crypto operators have said they tried to comply with the standards, with some blaming mistakes or faults by third-party ad providers for lapses in compliance. Other firms have said the ASA standards are unclear or that the watchdog retrospectively applied new rules to ads that already ran.
The ASA said its enforcement notice combines the precedents from its recent rulings into a set of guidelines for the industry. “This gives very, very clear guidance on exactly how they need to be advertising,” said Hudson.
Miles Lockwood, director of complaints and investigations at the ASA, praised some crypto firms for swiftly bringing their ads in line. “We are already seeing lots of these companies that are coming into compliance,” he said.
The notice begins a six-week countdown to a deadline, after which crypto firms that fail to follow ASA rules will be subject to tougher enforcement measures. These include working with ad providers to block non-compliant publicity or, ultimately, legal action against companies that refuse to comply.
Companies will face extra scrutiny once the government implements its plan to give the FCA powers over most cryptocurrency ads. The financial regulator’s regime, which currently applies to more mainstream investments such as stocks and funds, requires that an FCA-regulated firm approve ads before they run and includes stiffer penalties for violations.
However, Global Digital Finance, a crypto trade group, on Saturday wrote to the UK Treasury saying that the proposed standards were “unfairly punitive on the cryptoasset industry” in part because most crypto firms are not FCA-authorised and therefore would have to rely on other financial companies to sign off their ads.
Ian Taylor, executive director of the CryptoUK lobby group, said the industry “wants to be compliant” but that the new rules are “in effect a full prohibition” on crypto ads.
Source: Financial Times