Crypto’s high returns have given bragging rights to cryptocurrency service providers, who leverage this in their advertisements. These adverts grab a lot of eyeballs – including those of the regulators. We discuss various regulatory approaches to crypto adverts.
We all have a friend who tells us that a 1₹ investment in Bitcoin in 2010 would have made us a billionaire today. While this friend is likely off mark, it is true that cryptocurrencies have provided astronomical returns over the past few years. High returns have given bragging rights to cryptocurrency service providers (CSPs), who leverage this in their advertisements. And these adverts grab a lot of eyeballs – including those of the regulators.
In the last week alone three countries have clarified their position on regulating crypto adverts.
Singapore’s financial regulator issued new guidelines prohibiting CSPs from advertising their services through any public channel – no TV adverts, no billboards and no social media adverts either. This leaves CSPs with no option but to advertise using their own corporate websites and social media handles, but they can’t hire social media influencers to promote their services. Additionally, while doing that, they mustn’t trivialise the risks cryptos entail.
The Spanish securities regulator requires CSPs to advertise responsibly. Particularly, they need to present a fair picture of the risks related to investing in cryptos and prominently display a standard disclaimer which reads as “crypto assets are not suitable for retail investors and entire invested amount may be lost”. Unlike Singapore, Spain hasn’t prohibited public adverts. But it requires that CSPs inform the regulator at least 10 days in advance before publishing mass advertisements.
And finally, the UK government plans to regulate certain crypto adverts in the same manner as financial products such as stocks and insurance. Which means that only businesses authorised by UK’s financial regulator will be able to publish or authorise the publication of these adverts. With the proposed law, crypto adverts will need to be fair, clear and non-misleading. Simultaneously, UK’s advertising regulator is also taking action against irresponsible cryptocurrency adverts.
Interestingly, in both Spain and UK, the regulators are looking at NFTs differently, as they represent collectibles. In both countries, NFT advertisements appear to be outside the scope of crypto advert regulations. We are particularly happy with this as we have championed the cause of separate regulatory treatment of NFTs before.
Table: Regulatory approaches to crypto advertisements
| SINGAPORE | SPAIN | UNITED KINGDOM | |
| Applies to | Only licensed or exempted CSPs. | All crypto advertisements. | All advertisements of certain qualifying cryptos. |
| Doesn’t apply to | Crypto derivatives offered by unregulated entities. | Advertisements of NFTs, where they represent collectibles. | Advertisements of NFTs. |
| What do the regulations require? | CSPs cannot advertise their services publicly – not on TV, billboards or social media. Advertisements can be made through CSP’s own social media handles or corporate website. In their promotions, CSPs must not trivialise the risks cryptos entail. | CSPs and advertising service providers must advertise responsibly and present a fair picture of the risks related to investing in cryptocurrencies. All adverts must carry this standard disclaimer prominently: “crypto assets are not suitable for retail investors and entire invested amount may be lost”. The regulator must be notified at least 10 days in advance before publishing advertisements targeted at more than a lakh people. | Adverts of certain cryptos will be regulated in the same manner as adverts of other financial products such as stocks and insurance. Crypto adverts must be fair, clear and non misleading. Only businesses authorised by UK’s financial regulator will be able to publish or authorise the publication of these adverts. |
| Influencer Advertising | CSPs cannot engage influencers for promoting their services. | Influencers are deemed advertising service providers and must comply with the regulations. | No specific provision to deal with influencers. But there are rules which specify who can make financial promotions. |
| Applicable law and the regulator | Guidelines on provision of cryptocurrency services to the public – Monetary Authority of Singapore | Circular on the advertising of crypto-assets presented as a means of investment – Spanish National Securities Market Commission (CNMV) | Cryptoasset promotions: Consultation response (proposes amendment of Financial Promotion Order) – Financial Conduct Authority |
What all of this means?
Aggressive marketing by some CSPshas led to increased scrutiny of their adverts by regulators globally. In India, the government is said to express its concerns on cryptocurrency adverts on more than one occasion. Yet, there is still no uniform guidance for cryptocurrency adverts in India since we last discussed this. It was reported earlier this month that cryptocurrency exchanges have prepared an initial list of dos and don’ts for cryptocurrency adverts. As per this list, cryptocurrency exchange adverts should carry appropriate disclaimers on risks and avoid ‘exaggerated or unwarranted’ claims. Reportedly, crypto exchanges part of the Blockchain and Crypto Assets Council (BACC) are also updating their self-regulatory code of conduct (CoC). The updated CoC will also include the Advertising Standards Council of India (ASCI) guidelines on crypto adverts, once they are introduced.
With the increasing number of both users and CSPs, some form on regulations on cryptocurrency adverts are inevitable. While regulations are necessary, blanket prohibitions on public adverts such as in Singapore must be avoided. Like with mutual funds, responsible crypto advertising can go a long way in educating and onboarding new investors. A self-regulatory approach with the ASCI at its helm has worked for other industries and sectors, including the financial sector, and could be tweaked to work for the crypto-industry as well.
Authored by Priyam Jhudele and Mayank Takawane, Associates at Ikigai Law with inputs from Anirudh Rastogi, Managing Partner at Ikigai Law
Image Credits: Cory Doctorow / Flickr under a CC BY-SA 2.0 license.
