UK Regulator Bans Misleading Crypto Ads

The Advertising Standards Authority (ASA), the UK’s independent advertising regulator, has again intervened in the UK crypto market.

A few days ago, the advertising authority issued several orders on violations involving six crypto companies. These companies also include big names among the most popular exchanges in the sector, including several brokers.

Within this article, we will better analyze the decision of the ASA, studying its context and reasoning over its nuances. 

What didn’t the regulator appreciate?

The ASA explained that, in July 2021, the European branch of a famous exchange released a “misleading” promotion via a Facebook campaign. In this ad, the phrase “five pounds in Bitcoin in 2010 would be worth more than £ 100,000 in January 2021” was rated as misleading.

Although the statement above is correct and verifiable, the ASA did not appreciate the implicit message of the sentence. Indeed, the slogan seems to ensure that Bitcoin’s performance in the past can be a guarantee of future earnings, an old battle of financial regulators.

The ASA sanctioned another famous crypto exchange for an advertisement displayed in the London Bridge underground station in the UK capital city. The warning about the risk of losing money – explains the ASA – was shown for less than a second, making it impossible for commuters to read it.

The ASA, with its intervention, aims to reiterate the importance of two fundamental concepts:

  • In financial markets, it is not fair to promise future earnings based on historical past performance
  • Risk disclaimers are required by law for a reason, and the crypto market is so volatile that investors need to be informed about the possibility of losing money.

Other interventions by the ASA

Another popular crypto trading platform has been promoting an advertising campaign for months with “Time to buy Bitcoin (BTC)”. The ASA blocked the initiative calling it “misleading and not very responsible”. The statement did not mention any risk associated with the operation, and it invited the public to invest directly in the market.

The intervention of the ASA was necessary following numerous reports from users of the portal. Considering the trend of Bitcoin during 2021, it is likely that many inexperienced traders have recorded significant losses on the market, accusing the platform of misleading advertising.

The FCA battle

The UK’s Financial Conduct Authority (FCA) has launched an £ 11 million crypto-awareness campaign. The purpose of the operation is to warn citizens about the risks associated with crypto investments.

The British regulator is concerned about the growing spread of crypto trading among young people. Nikhil Rathi, director of the FCA, believes that more and more people see the crypto-financial investment industry as pure entertainment.

Since several studies reveal that cryptocurrency investors are, on average, very young, the FCA has decided to favor the digital marketing channel for its operation.

The British regulator has repeatedly stated that anyone investing in cryptocurrencies should be ready to lose 100% of their investment. Moreover, FCA’s digital campaign launched just a few days after the intervention of the ASA on the market. Therefore, it could suggest a possible correlation between the two operations.

Besides the dangers of crypto, the FCA director talked more about the future policy of the British regulator. Rathi explained that the FCA would focus more on examining the business models of new players in the crypto universe. 

Among the concerns mentioned by Rathi and the risk of losing money is the Anti-Money Laundering (AML) legislation.

The “Musk Central Bank”

Elon Musk’s tweets had on the cryptocurrency market in 2021 is among the factors that most frighten regulators. In the United States, the SEC has frequently berated Musk for allegedly manipulating his company’s stock. However, it cannot intervene on cryptocurrencies since the SEC does not consider cryptos a regulated asset.

Ironically, some traders have started talking about Elon Musk’s statements created a “central bank” effect. Indeed, in 2021 the price of Bitcoin was often at the mercy of the Tesla CEO’s decisions. And, the same is true for Dogecoin.

The speed with which the crypto market reacts to comments from an external operator is concerning for regulators. The FCA’s digital campaign takes place in this context and with social media at the market’s center.

Final thoughts

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This story gives us yet another example of the lack of international coordination on crypto regulation. Different countries are using various tools to try to regulate this new market. The IMF has recently called for a global crypto policy, and we will see whether 2022 will be the year where institutions will prefer regulating the market rather than banning it.

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