The Advertising Regulatory Board (ARB) has introduced new rules warning crypto investors about potential capital losses.
Crypto ads should be easy to understand for the target audience, and provide a balanced message about the returns, features, benefits and risks associated with the product or service.
The changes to the council’s Code of Advertising Practice are aimed at protecting consumers from being misled by unethical advertisers and are the result of consultation and agreement with the cryptocurrency industry.
Hope to prevent crypto fraud
Industry players hope this will make it harder for scams such as Mirror Trading International, which promises 10% monthly returns, to gain traction.
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In terms of the new rules, advertisements that refer to rates of return, projections and forecasts must be supported by adequate substantiation of how these are calculated.
Advertisements should clearly state that investing in crypto assets may result in capital losses as their prices are variable and can go up as well as down.
Crypto advertisers should also clarify that past performance is not indicative of future performance.
The rules state that historical periods or past performance “shall not be presented in a manner that creates a favorable impression of the advertised product or service”.
In addition: “Ads by crypto asset service providers that are not registered credit providers must not encourage the purchase of crypto assets on credit. This does not prevent ads that provide information about payment methods offered by crypto asset service providers.
Rules for influencers
Another new rule concerns influencers or ambassadors who are often used to promote crypto asset products or services. They only share factual information, and may not offer advice on trading or investing in crypto assets, or promise any benefits or returns on investment.
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“This is a great example of the industry seeing the harm that can be done in the name of, and taking steps to manage the problem without being forced by the government,” said ARB CEO Gail Schimmel.
“This is an exciting project and we know it will provide better protection for vulnerable consumers.”
The ARB was established by the marketing and communications industry to protect consumers through the regulation of advertising, including packaging.
Eyes open, rogues alert
“The rules on ethical advertising are non-negotiable for us as an industry,” said Marius Reitz, general manager for Africa at crypto exchange Luno, who is leading the project.
“We don’t want rogue advertisers making claims that mislead vulnerable consumers about the reality of crypto investing.
“It is important to us that consumers enter this exciting market with open eyes and realistic expectations.”
Team work
The rules are a collaborative effort between ARB and crypto players such as Luno, AltCoinTrader and others to help develop rules so that the industry can self-regulate advertising in the South African community.
“Responsible advertising is a fundamental pillar of an ethical industry where consumer expectations are managed and risks are clearly and unambiguously addressed,” said David Porter, GM at crypto exchange AltCoinTrader.
“Advertising on the line in the plane agreed from the principle of helping to distinguish between companies that operate in a sustainable way to those that have the potential to be fraudulent,” added Porter.
“Not only is this beneficial for consumers, but where companies adhere to the code, the data shows that responsible advertising helps companies build better relationships with clients while increasing trust, loyalty and ultimately customer retention.”
Legitimate players accept these rules
The ARB’s decision to specifically include crypto in its advertising standards is welcomed as it lays the groundwork for better consumer protection.
“After everything that has happened in the crypto space – from the FTX scam to the recent collapse of Genesis – it is more important than ever that consumers are protected from crypto-related scams and hyperbolic ads that promise unrealistic returns,” said Sean Sanders, CEO. from crypto investment company Revix.
“We as an industry need to mature and rebuild trust with the public, which starts with fair and non-misleading advertising.”
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Sanders added that crypto assets and blockchain are still new technologies with the potential to disrupt and revolutionize many industries. “It is important that these innovations are accessible to the public with advertising that effectively communicates the risks involved when investing in this space.”
Added FiveWest CEO Omer Iqbal: “Crypto assets present exciting new opportunities, offering new ways to transact and invest – but it is vital that consumers are not sold products that are misleading or deceptive.
“The new ARB rules are a step in the right direction, because consumers should be aware of the risks of misleading advertising and should be aware of promises of quick or high returns, especially those that seem too good.”
This article originally appeared on Moneyweb and is republished with permission.
Read the original article here.
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