The Advertising Regulatory Board (ARB) has introduced new rules warning crypto investors about potential capital losses.
Crypto ads must be easy to understand for the target audience and convey a balanced message about the returns, features, benefits, and risks associated with the product or service.
The Board’s amendment to the Code of Advertising Practices aims to protect consumers from being misled by unethical advertisers and is the result of consultations and agreements with the cryptocurrency industry.
Hopes to Curb Crypto Scams
Industry players are hoping this will make it harder for scams like Mirror Trading International, which have promised monthly returns of 10%, to gain a foothold.
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Under the new rules, advertisements citing returns, projections and forecasts must be accompanied by adequate justification for their calculation.
Advertisements must clearly state that investing in crypto assets can result in capital losses as the value is variable and can go down as well as up.
Crypto advertisers also need to make it clear that past performance is not an indication of future performance.
The rules state that historical periods or past performance “should not be presented in a way that conveys a positive impression of the advertised product or service.”
Additionally: “Advertising by crypto asset service providers who are not registered credit providers should not encourage the purchase of crypto assets on credit. This does not preclude advertising with information about the payment methods offered by crypto asset service providers.”
Rules for Influencers
Another new rule deals with influencers or ambassadors, which are often used to promote a crypto-asset product or service. You may only provide factual information and may not offer any advice on trading or investing in crypto assets or make any promises about the benefits or returns of investing.
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“This is a wonderful example of an industry that sees the harm that could be done on its behalf and is taking steps to self-regulate the issues without being coerced by the government,” said Gail Schimmel, CEO of ARB.
“This has been an exciting project and we know it will result in better protection for vulnerable consumers.”
The ARB was founded by the marketing and communications industry to protect consumers through self-regulation of advertising, including packaging.
Eyes open, villains beware
“For us as an industry, rules around ethical advertising are non-negotiable,” says Marius Reitz, general manager for Africa at crypto exchange Luno, who led 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.”
The rules were a collaborative effort between the ARB and crypto players like Luno, AltCoinTrader and others to help develop rules for the industry to self-regulate the way it advertises to the South African public.
“Responsible advertising is a fundamental backbone of an ethical industry where consumer expectations are managed and risks are articulated in a clear and unambiguous manner,” said David Porter, GM of crypto exchange AltCoinTrader.
“Advertising in line with agreed principles helps distinguish companies that are sustainable from those that are potentially fraudulent,” adds Porter.
“Not only is this beneficial for consumers, but data has shown that companies that adhere to these codes help responsible advertising build better relationships with customers while improving trust, loyalty and ultimately customer retention .”
Legitimate players welcome the rules
The ARB’s decision to explicitly include crypto in its advertising standards is welcomed as it lays the foundation for better consumer protection.
“After everything that has happened in the crypto space – from the fraudulent explosion of FTX to the recent collapse of Genesis – it is more important than ever that consumers are protected from crypto-related scams and over-the-top advertising that promise unrealistic returns,” says Sean Sanders, CEO of crypto investment company Revix.
“We as an industry need to mature and rebuild public trust, which starts with fair and not misleading advertising.”
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Sanders adds that crypto assets and blockchain are still emerging technologies with the potential to disrupt and revolutionize many industries. “It is important that these innovations are available to the public with advertising that effectively communicates the risks associated with investing in this space.”
Omer Iqbal, CEO of FiveWest, adds: “Crypto assets offer exciting new opportunities and offer people a new way of transacting and investing – but it is very important that consumers are not sold products that are misleading or fraudulent.
“The new ARB rules are a step in the right direction as consumers should be aware of the risks of misleading advertising and be made aware of quick or high return promises, especially those that look too good to be true.”
This article originally appeared on Moneyweb and has been republished with permission.
Read the original article here.
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