Crypto everywhere but who is regulating it?


One area that is getting harder to ignore is the number of ads that appear for cryptocurrencies and crypto exchanges. Whether as sponsors for major sports teams, pop-ups on your computer, or mainline TV broadcast or print ads. The increased interest in the technology has also been accompanied by a growing trend of cryptocurrency scams. According to reports from The Times, the number of cryptocurrency scams reported to the FCA more than doubled between 2020 and 2021.

In this context, the more we wonder, how are cryptocurrencies regulated? Are consumers protected?

Under anti-money laundering regulations, British crypto-asset companies must be registered with the FCA; however, cryptocurrencies and most other crypto assets are not currently regulated by the FCA and are also not subject to any regulation beyond registration requirements, including in relation to advertising. . In January 2022, the government announced plans to legislate and tackle misleading promotions of crypto assets, to ensure advertisements are fair and clear. However, this legislation is not expected to take effect until 2023 at the earliest.

As a result, and until regulation is introduced by the FCA or other authorities, the advertising of crypto assets, unlike financial products within the scope of the FCA, remains subject only to the general requirements of the advertising codes implemented by the Authority of Advertising Rules (AS A) under the CAP Code (covering non-broadcast advertising) and the BCAP Code (covering television and radio advertising).

Following the Government’s announcement in February 2022, the ASA published an online guide aimed at advertising crypto assets. The preface said: “Because of the risks and complexities involved, advertisers of crypto assets must take special care to ensure that they do not mislead consumers and are not socially irresponsible in the way they promote them.” The ASA guide advises that:

  • Advertisers must clearly state that crypto assets are not regulated by the FCA and are not protected by financial compensation schemes.
  • Ads should make it easy for their target audience to understand financial products. Advertisers should consider the setting and scope of their ads and adjust the jargon used accordingly.
  • Cryptocurrency volatility should be explained in any announcement along with the basis used to calculate any projections and should not mislead anyone into thinking that past performance is a guide to future performance.

The ASA may require the removal of advertisements that conflict with its rules and advice and may restrict advertising space, require that future advertisements be evaluated, or refer those that violate Ofcom or Trading Standards. Its powers are, however, less robust than those of other regulators: it cannot issue fines or threaten imprisonment. However, companies still need to be wary of the reputational damage a public decision issued against them by the ASA could have.

Importantly, it’s not just companies that offer and advertise crypto directly that are at risk. Papa John’s pizza was criticized for an ad campaign in which customers were offered free bitcoin when they bought a pizza. Although no cryptocurrency purchases were made, the ASA felt that this promotion “took advantage of the inexperience or gullibility of consumers and trivialized investing in cryptocurrencies.”

As cryptocurrencies become more widely used, for example Colorado has just announced that it will be the first US state to accept cryptocurrency tax payments, it is becoming clear that authorities are becoming more aware of and interested in all things “crypto”. The ASA’s Papa John’s ruling makes it clear that any business considering moving with the crypto trend, such as within a promotion or strategic partnership, or as a payment method, should consider its advertising carefully. The ASA’s view is that a mere introduction to crypto can have adverse implications for consumers and this appears to be in line with the tone of the upcoming legislation.