The South African Advertising Regulatory Board has included a new clause for the cryptocurrency industry aimed at protecting consumers from unethical advertising.
In October 2022, the South African Financial Sector Conduct Authority (FSCA) declared crypto assets as financial products under the Financial Advisory and Intermediation Services (FAIS) Act.
Thus, allowing the FSCA and other regulators to tackle crypto scams and also protect customers.
According to the statement, Unathi Kamlana, the Commissioner of the FSCA defines a crypto asset as a digital representation of value that: is not issued by a central bank, but is capable of being traded, transferred or stored electronically by natural and legal persons with the purpose of purpose of payment, investment and other forms of utility; applies cryptographic techniques; and/or uses distributed ledger technology.
On Monday (January 24, 2023), the Advertising Regulatory Board (ARB) announced that it is adding a new clause to the Advertising Code of Practice that deals with cryptocurrency products. The ARB is also looking to toughen the rules for social media influencers who promote cryptocurrencies.
“The rules around ethical advertising are non-negotiable for us as an industry. We don’t want dishonest advertisers making claims that mislead vulnerable consumers about the reality of crypto investing,” Marius Reitz, Africa Manager at Luno, a company based in South Africa. change, he said. ARB updated these regulations after consultation with critical stakeholders, including Luno.
Within the updated ARB Code of Advertising Practices
“It is important to us that consumers enter this exciting market with their eyes open and with realistic expectations,” Reitz added.
The new subparagraph was added to section III of the advertising code.
Find excerpts below:
- Announcements must expressly and clearly state that investing in crypto assets may result in loss of principal as the value is variable and may go up or down. The wording should be, or communicate the same as, the following example: “Investing in crypto assets may result in loss of principal.”
- The general message of the ad must not contradict the warning statement above.
- An advertisement for a particular crypto asset product or service should explain the relevant product or service in a way that is easily understandable to the target audience.
- Advertisements must deliver a balanced message about the performance, features, benefits, and risks associated with the product or service.
- Rates of return, projections and forecasts must be supported by adequate justification. It must be communicated how any rate of return, projection or forecast is calculated and what significant conditions apply.
- Information presented on past performance should make it clear that past performance is not indicative of future performance. Any historical period or past performance must not be presented in such a way as to create a favorable impression of the advertised product or service.
- Advertisements from crypto asset service providers that are not registered credit providers should not encourage the purchase of crypto assets on credit. This does not prevent advertisements from providing information about payment methods offered by crypto asset service providers.
- When influencers or ambassadors are used to promote a crypto asset product or service, they may only share factual information. Influencers and ambassadors may not offer advice on trading or investing in crypto assets and may not promise benefits or profits.