ASA Goes Postal On Crypto

Just in case you thought the Advertising Standards Authority was on a frolic of its own when issuing its recent guidance on cryptoasset advertising, yesterday it went postal, literally, by issuing an Enforcement Notice to 50 advertisers whose advertisements it considers do not comply with specific rules in its Non-broadcast Code. Advertisers have until 2 May 2022 to rectify the problems, after which the ASA will commence targeted monitoring and potentially sanctions (including adverse publicity and referrals to Trading Standards for enforcement).

Unlimited fines, jail time and confiscation of assets as the proceeds of crime are all possible results of Trading Standards enforcement activity. 

It is also clear that the ASA is working closely with the Financial Conduct Authority in determining whether any financial regulations are being infringed, with similar potential consequences.

The ASA's Enforcement Notice includes more detailed guidance and illustrations of what is - and is not - acceptable by way of cryptoasset advertising. No need to recite that here.

Regardless of concerns from a policy or philosophical perspective, and any efforts to sway the approach to cryptoasset regulation being taken by the ASA, Treasury and/or FCA, anyone advertising cryptoassets in or from the UK should take care to heed the ASA guidance for now.

Can You Advertise CryptoCurrencies and Other Cryptoassets?

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.

 

March Deadline For Buy Now Pay Later Offerings

Source: Financial Times

'Buy now pay later' providers and merchants have until 2 March 2021 to meet new guidance on how to comply with advertising standards. The guidance is summarised below. Please let me know if you need assistance.

Unregulated BNPL offerings allow consumers to defer full payment for a short period or allow payment by instalments, without interest.

To comply with the Advertising Standards Authority's CAP and BCAP Codes, all marketing communications for BNPL (including text on online checkout pages) must not be misleading. 

The ASA requirements apply even though the offering is not regulated by the Financial Conduct Authority, so it must be clear that BNPL services are still a form of credit and that using it could result in late payment fees, referral to debt collection agencies and have a negative impact on the customer's credit score. 

Marketing should not imply that is suitable for all customers or is risk-free credit.

Any claims that using BNPL will not impact a person's credit score or have no consequences for missing payments must be substantiated - particularly as debts may be sold to debt collection agencies. 

It is permissible, however, to explain that a "soft" credit check may not affect the customer's credit score, where that is in fact the case.

BNPL is not "free" if any fees are payable in any circumstances. 

Claims cannot be qualified in a way that contradicts the claim being made.

Ads for financial products must state the nature of the contract, any limitation, expense, penalty or charge and the terms of withdrawal. 

If the ad is brief, consumers should be directed to a page with all the relevant information (NB: this conflicts with FCA requirements that regulated consumer credit advertisements must be 'standalone compliant' - i.e. show all the required information, e.g. using a screenshot).

Where BNPL is offered during checkout: 

• it should be explicitly clear to customers (not disguised as means of entering card details as if paying by card immediately
• other available payment methods should be obvious.
• all relevant information must be set out on the page (not via a link).

This post is for information purposes only and is not legal advice and should not be relied upon as such.  Please let me know if you do need advice.