The UK's Advertising Standards Authority has just updated its guidance on advertisements for cryptoassets. I call it 'guidance' even though it claims to be 'advice' (but not 'legal advice' or binding on anyone). I have problems with it from a financial regulatory standpoint, but it's good to know that the ASA is watching the crypto advertising space more generally. Tougher rules on promoting or marketing certain 'qualifying cryptoassets' in the UK are also on the way. If you have concerns about the status of your cryptoasset or related advertising, please get in touch.
Are Cryptoassets Regulated?
On this question, the ASA's guidance functions more as a plea for directly regulating cryptoassets (as is slowly happening) than a reliable guide to whether cryptoassets or related activities may be regulated already, or what 'unregulated' really means.
The ASA insists that "advertisers must clearly state that cryptoassets are not regulated by the FCA" and are not subject to protections afforded by either Financial Ombudsman Service or the Financial Services Compensation Scheme.
It's all very well to say that 'cryptoassets' themselves are not regulated, but the real question is whether the cryptoasset could also be another type of instrument that is regulated.
I see new proposals for cryptoassets all the time which would be caught by existing regulation (and could yet be caught by new UK financial promotions rules and other regulation that is being consulted upon in the UK and the EU).
Few people seem to be focusing on what 'fungible' really means in the context of allegedly 'Non-fungible' tokens (NFTs), for example.
Equally, activities
such as operating a cryptoasset exchange or custodian wallet are
regulated and require the person or firm carrying on those activities to be registered (for anti-money laundering purposes), even if the cryptoassets being exchanged or safeguarded are not regulated instruments.
In this context, the ASA's statement that "The vast majority of cryptoassets, such as cryptocurrencies are not currently regulated by the Financial Conduct Authority (FCA)" implies that the thousands of cryptoassets and related activities have all been assessed and found not to be regulated by the FCA (or another country's regulator), and that is very doubtful indeed.
Ironically, it may therefore be misleading for an advertisement to state that a cryptoasset is "not regulated by the FCA" unless (at the very least) legal advice to that effect has been obtained.
Other Reasons Why Ads For Cryptoassets Might be Banned by the ASA
Of course there are other ways that an advertisement for a cryptoasset can be problematic, and the ASA's guidance on that is more helpful.
For instance, snowing consumers with jargon, concealing or trivialising the risks or tax implications will result in the ASA concluding that you're preying on consumers' inexperience or 'credulity' (gullibility).
Missing key information and/or failing to explain that values can go down as well as up, or the basis used to calculate any projections/forecasts, will also mean your ad falls victim to the ASA rules, as will missing a statement that past performance is not a guide to a cryptoasset's future performance.
If you have concerns about the status of your cryptoasset or related advertising, please get in touch.
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