South African Guidelines For Cryptocurrency Ads

The market for Bitcoin, stablecoins and cryptocurrency assets has witnessed a remarkable surge in popularity in recent years, captivating the attention of investors and enthusiasts across the globe. It has morphed from an outlier community on niche forums on the internet to a recognised asset class, with Bitcoin leading the way.

While financial innovation provides new opportunities, it is not without its risks; the allure of making money has pulled many retail investors into an unregulated open market, and as a result, scams and financial shenanigans are running riot.

South Africa, a nation at the forefront of embracing technological advancements on the African continent, has also entered this dynamic realm, recognising the potential of Bitcoin and crypto assets. While retail investors were the first to dive in, and South Africa is now in the top 10 of the highest penetrations of Bitcoin ownership per capita in the world, companies followed to service the obvious demand.

According to South African-based exchange Luno, their platform alone has seen over 600 billion Rand in trades, and when we consider that Luno is one of several exchanges, it is safe to assume that digital currency in South Africa has far surpassed a Trillion Rand in trade volume.

When Trillions of Rands pour into any industry, you're going to see scammers and shady personnel follow to try and break off a piece of that cash flow for themselves. Scams and Ponzi schemes like Mirror Trading International and Africrypt have captured the headlines, but there are several smaller multiplication scams and Ponzi schemes running right now promising investors the world.

The proliferation of local scams has seen the Government spring into action to try and sure up this new market, ensure consumer protection, and maintain market stability; the South African Advertising Regulatory Board (ARB) has implemented specific guidelines for crypto asset advertisements.

The regulatory gray area

Scams will always exist in some shape or form, but what makes the current batch of crypto scams unique is the regulatory grey areas surrounding these assets. While Bitcoin is seen as a commodity, altcoins and NFTs are desperately trying to acquire this categorisation instead of being labelled securities, which comes with more honourous regulation.

While these arguments continue to evolve without clear guidelines, it's allowed for the unprecedented promotion of digital asset investments through news sites, blogs, video hosting platforms, and, of course, social media and instant messaging groups.

To try and reduce the impact of promoting unregulated securities, a new ARB framework has been set up to govern those looking to promote Bitcoin and other digital assets in South Africa.

The ARB's Regulatory Framework

In January 2023, the ARB broadened the scope of its Code of Advertising Practice (ARB Code) to encompass Bitcoin, stablecoins, NFTs and altcoins under the umbrella of crypto assets, introducing new requirements for advertisers venturing into this domain.

These regulations aim to promote responsible investing practices, ensuring that consumers are adequately informed about the associated risks and complexities of crypto assets.

Key Provisions of the Crypto Asset Advertising Regulations

The ARB's crypto asset advertising regulations mandate that all promotional materials pertaining to crypto assets must adhere to the following principles:

Clear disclaimers

Advertisements must prominently display a warning that investing in crypto assets carries the risk of capital loss. This disclaimer should not be overshadowed by other elements of the ad, ensuring that consumers are clearly informed of the potential financial implications.

Balanced representation

Crypto asset advertisements must provide a balanced and truthful portrayal of the features, benefits, and risks associated with these investments. Exaggerated claims or misleading statements are strictly prohibited.

Target audience consideration

Advertisements should be tailored to the comprehension level of their intended audience, avoiding complex jargon or overly technical language. The message should be conveyed in a clear and accessible manner, ensuring that all consumers can grasp the essential information.

Substantiation of claims

Rates of return, project details, and any performance forecasts must be supported by verifiable evidence. Advertisers must be prepared to provide adequate substantiation for their claims, promoting transparency and trust.

Compliance with FICA and FAIS

Advertisements must comply with the Financial Intelligence Centre Act (FICA) and the Financial Advisory and Intermediary Services Act (FAIS), ensuring that crypto asset offerings adhere to relevant financial regulations.

Influencer endorsements

The ARB's regulations extend to influencers promoting crypto assets, emphasising the need for transparency and responsible marketing practices.

Influencers are required to disclose any financial relationships with crypto companies and ensure that their endorsements are based on genuine personal experiences and beliefs.

Misleading or exaggerated statements are strictly prohibited, as they can potentially mislead consumers about the potential of crypto assets.

The impact of crypto asset advertising regulations

The introduction of crypto asset advertising regulations in South Africa marks a significant step towards consumer protection and market integrity. By establishing clear guidelines, the ARB aims to foster a responsible crypto investment environment, ensuring that consumers are well-informed about the risks and benefits of these digital assets.

As the crypto landscape continues to evolve, the ARB remains committed to adapting its regulations to address emerging challenges and promote responsible advertising practices. This ongoing regulatory oversight will play a crucial role in shaping the future of crypto asset adoption in South Africa.

How will this affect businesses offering digital assets?

The implementation of crypto asset advertising regulations in South Africa will have a significant impact on businesses that sell digital assets. It will lay the groundwork for assessing advertising material and help consumers discern between advertising and what they are getting into before purchasing said assets.

Implications from this regulation include:

Increased transparency

Businesses must be more transparent about the risks and potential benefits of their crypto-asset offerings. This includes prominently displaying disclaimers about capital loss risks and providing balanced information about the features and benefits of their products.

Responsible marketing practices

Businesses will need to ensure that their marketing materials are truthful, accurate, and not misleading. They should avoid making exaggerated claims or using overly technical language that could confuse consumers.

Adaptability to evolving regulations

Businesses should be prepared to adapt their advertising strategies as the regulatory landscape for crypto assets continues to evolve. They should stay informed about new regulations and guidelines to ensure ongoing compliance.

Potential benefits of crypto asset advertising regulations

While the implementation of these regulations may initially pose some challenges for businesses, there are also potential benefits to consider:

Enhanced consumer trust

By adhering to responsible advertising practices, businesses can foster greater trust among consumers, leading to increased brand loyalty and customer satisfaction.

Reduced risk of misleading claims and misinformation

Clear and transparent advertising can help reduce the risk of misleading consumers about the potential of crypto assets, promoting informed decision-making.

Alignment with global regulatory trends

South Africa's crypto asset advertising regulations align with similar measures being implemented in other countries, contributing to a more harmonized global regulatory framework.

Promotion of long-term sustainability

Responsible advertising practices can contribute to the long-term sustainability of the crypto asset industry by fostering informed investment and discouraging speculative behaviour.

If you are a digital asset-based business or you offer access to digital assets, you are going to need to review all your marketing for any possible offences and clean up your act.

If you are unsure where to start, consider reviewing some of the following:

• Any paid media should be updated to disclose that these article placements are sponsored.
• Any influencers should tag their posts as #ads or use the native ad, collaboration and brand tags that social media platforms provide.
• On-site content or hosted content such as Substacks and Medium blogs should always contain disclaimers.
• Always link your terms and conditions pages to any campaign pages and ad links where applicable.

Once you've cleaned up some of your legacy promotions and advertising, you must ensure that all future ads comply with the regulations.

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Recommended reading

If you enjoyed this post and have a little extra time to dive deeper down the rabbit hole, why not check out the following posts on cryptocurrency and blockchain.

• Why Blockchain and Cryptocurrency Is The Future Of Money
• 24 Ways To Earn Cryptocurrency
• How To Pay Tax On Cryptocurrency In South Africa
• How To Buy Bitcoin In South Africa
• Why Does Your Bitcoin Wallet Address Keep Changing?
• How To Tokenise Your Art & Sell It For Cryptocurrency

Disclaimer: This article should not be taken as, and is not intended to provide any investment advice and is for educational purposes only. As of the time of posting, the writers may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency, as all investments contain risk.

Tags: Advertising, Marketing