Advertising and cryptoassets – the ASA updates its guidance

Regulatory environment

The majority of cryptoassets are not currently regulated by the Financial Conduct Authority (FCA), so consumers are not afforded the protections of financial compensation schemes. By extension, the FCA does not currently have a role in regulating the advertising of most cryptoassets in the UK. Whilst this is likely to change, as the government has announced its intention to strengthen the rules surrounding certain cryptoassets in order to bring them within the FCA's regulatory regime [2], it is not anticipated that such plans will be implemented before 2023. NFTs have also been excluded from the government's proposed changes to-date because the government does not intend to apply financial promotions regulation to 'digital collector items' (i.e. non-financial products), although further regulation of NFTs could still follow. For more information of NFTs generally, please see our previous article: Newly minted – NFTs in the entertainment industries.

In the meantime, all cryptoassets will continue to be subject to the CAP Code and the ASA will retain oversight on issues of responsibility across advertising for all forms of cryptoassets.

Updates to the guidance

In relation to the obligation on advertisers to clearly state that cryptoassets are not regulated by the FCA or protected by financial compensation schemes, the updated guidance now advises advertisers to make sure that such statements are clearly and prominently stated. The statement should be legible and easily seen by consumers. The ASA will take into account the size of the text, its positioning in the ad and the nature of the medium in which the ad is presented when determining compliance. For example, a risk warning in a print ad is more likely to be considered to give consumers time in which to read and understand the disclaimer than a warning that is only seen briefly onscreen in a digital ad.

The ASA has also given further guidance on the application of Rule 14.1 of the CAP Code, which states that financial products must be set out in a way that allows them to be easily understood by the audience being addressed. For advertisers looking to market cryptocurrencies, the context will be crucial. The guidance suggests that a promotion placed in a specialist financial publication may be able to make use of more technical jargon than an untargeted ad. The ASA clearly wants marketers to understand that, because crypto assets are new and unlike any other financial products that consumers may encounter, the terminology surrounding them also will be unfamiliar, so particular care is needed to ensure the ad is not confusing or misleading. Avoiding technical jargon should reduce the risk of potential complaints from consumers that they have been misled.

Conclusion

As before, this refresher for advertisers on the marketing of cryptoassets is an indication of the ASA's continued focus in this area. As stated by the ASA:

Crypto assets have exploded in popularity in recent years, but there’s a real danger that people may be drawn in to invest life savings that they later lose based on poor understanding. [3]

The ASA recognises that it must take steps to ensure that ads don’t mislead consumers about a product’s risks or facilitate irresponsible cryptoasset promotion.