With the crypto market evolving into a more developed industry, consumer protection is now a top priority for governments and regulatory bodies worldwide.
In a recently updated code of advertising practice published by the South Africa Advertising Regulatory Board(ARB) on Monday, the country introduced some new guidelines aimed at the crypto advertisements sector, particularly protecting consumers from unethical advertising.
South Africa Mandates New Guidelines To Crypto Ads
The new guidelines refer to companies and individuals dealing with cryptocurrency products and services in South Africa, mandating them to abide by Section III of the country’s advertising code. The guidelines include that crypto advertisements must “expressly and clearly state that investments may result in the loss of capital as the value is variable and can go up as well as down.”
In addition, crypto adverts must not be sugar-coated or deny warnings related to potential investment losses. Any advertisement made regarding cryptocurrency products or services must include a well-detailed and “easily understandable” manner of explanation for the targeted audiences.
While being detailed in the supposed offer, the adverts must also give balanced messages around returns, features, benefits, and risks related to the associated product or service.
The ARB didn’t stop there with risk warnings of returns as the regulator added that rates of returns, projections, or forecasts must also be adequately substantiated, including how the rewards are calculated and what conditions apply to touted returns.
As for the resources to be used for the advert, ARB mentioned that any information from a past performance cannot be used to assure consumers of future performance or returns. Additionally, no information presented in the crypto ads should be used in such a favorable way for the advertised product or service.
At the end of the note, the ARB reflected on social media influencers and brand ambassadors being used as persuaders to consumers. The regulator noted that they must comply with these specific advertising standards, which include being required to make general factual information and restrain from offering advice on trading or investing in crypto assets, as well as promises of benefits or returns.
Marius Reitz, general manager for Africa operations for cryptocurrency exchange Luno, stated, “Media platforms are understandably looking for advertisers, but we were concerned that they weren’t doing sufficient due diligence on whether advertisers were above board.”
Influencers As Crypto Advertisers Gone Wrong
Though influencers are known to be one of the best ways to convince or mass promote a product or service given their influence, their impact can also be used for evil, affecting the crypto market negatively. An example is the Hollywood star Kim Kardashian promoting EthereumMax (EMAX), a cash grab project that caused harm to investors.
After the EMAX project initiated its goal, which was to pump and dump on investors, a class action lawsuit was filed against the promoters Kim Kardashian and sports legend Floyd Mayweather Jr. This resulted in strict guidelines from regulators regarding the promotion of investment schemes such as crypto assets.
While the guidelines behind the usage of influencers as advertisers may continue to be strict as the crypto industry gains more adoption, the crypto market has also continued to gain more stamina over time as more regulation troops in.
As for the crypto market, the total market capitalization has rallied to the upside over the past week, showing a bullish trend and exceeding the $1 trillion benchmark. At the time of writing, the global crypto market cap still sits above a trillion, up by nearly 1%.