- Crypto ads in South Africa must now clarify that investing in crypto assets may lead to loss of funds.
- The overall statement of the ad should re-echo the warning statement and not downplay it.
- The South African Advertising Regulatory Board aims to protect unsuspecting users from being misled by unethical ads.
South Africa’s Advertising Regulatory Board (ARB) has added a clause to its Code of Advertising Practice that informs crypto-related adverts and what they should contain.
According to TechCentral, ARB CEO Gail Schimmel said, “The new rules are aimed at protecting consumers from being misled by unethical advertisers and are the result of consultation and agreement with the cryptocurrency industry,”
The move to regulate the information crypto advertisers pass to consumers was spearheaded by crypto exchange Luno.
Schimmel commended the move by the crypto exchange, saying that it was good that people within the industry saw how easily harm could come to consumers and decided to do something about it.
Luno’s General Manager for Africa, Marius Reitz, said, “Rules around ethical advertising are non-negotiable for us as an industry. We don’t want rogue advertisers making claims that mislead vulnerable consumers about the reality of crypto investment.”
According to the new code of advertising practice,
- Advertisers must state clearly that “Investing in crypto assets may result in the loss of capital” as cryptocurrencies are notoriously volatile.
- The overall message of the ad should not downplay the possibility of losing funds to crypto.
- Advertisements for a particular product must explain its offerings clearly to its target audience.
- Advertisements must be balanced. This means risks should be stated as clearly as benefits.
- Rates, returns and forecasts by the advertisers must be supported by adequate substantiation. This means that calculations that resulted in the forecasts should be communicated clearly.
- It should be clear that the favourable performance of the crypto market in the past is not indicative of future performances.
- When using influencers to promote a crypto asset or product, every piece of information they give should be factual. Offering advice to consumers is not permitted.
Crypto scams from South Africa are some of the biggest in the world
In the past, South Africans have fallen for some of the biggest crypto scams in the world. The most recent is the $1.7 billion bitcoin fraud perpetrated by Cornelius Johannes Steynberg, a South African from Stellenbosch, Western Cape.
He was charged in June 2022 by The Commodity Futures Trading Commission (CFTC), which stated that Steynberg created and operated an entity known as Mirror Trading International (MTI), which was advertised to consumers as a way to build wealth through bitcoin.
Steynberg advertised MTI as a commodity pool that accepted flagship cryptocurrency as a way of participation. The scam lasted for three years —2018 to 2021 — and in that period, Steynberg received more than 29,000 bitcoins ($1.7 billion) from unsuspecting investors.
Another popular crypto scam was a $3.6 billion heist by brothers Ameer Cajee and Raees Cajee.
The brothers are the founders of the crypto investment app Africrypt, which had accepted up to 69,000 bitcoins from users before 20-year-old Ameer Cajee informed investors that the platform had been hacked. When authorities got involved, the brothers were nowhere to be found.
The ARB’s insistence that crypto advertisements are communicated according to the new clause could help steer South Africans away from suspicious crypto entities. However, ads beyond the purview of the ARB will still be a problem.