Advertising Standards Authority publishes new guidance on “Cryptoassets”

In newly published guidance, the Advertising Standards Agency (ASA) this week has described cryptoassets as “complex and volatile products”, and has stressed the need for advertisers of cryptoassets to operate responsibly, and in a manner that ensures consumers are not misled during any cryptoasset promotions/advertisements.  

HMRC has defined Cryptoassets as “cryptographically secured digital representations of value or contractual rights”.  Within this definition, we have a collection of digital assets such as cryptocurrencies (Bitcoin for example), utility tokens (Fan tokens used by some sports teams would be an example), and Non-fungible tokens (or NFTs, which are perhaps best described as forms of digital art).   

One of the particular problems in relation to cryptoassets highlighted by the ASA guidance, is the fact that many cryptocurrencies and cryptoassets are currently not regulated by the Financial Conduct Authority (FCA), with the FCA accordingly exercising no powers over the advertisement of many cryptocurrencies.  As a result of this, cryptoassets do not currently fall within the scope of the Financial Services Compensation Scheme (FSCS) or the Financial Ombudsman Service (FOS).

Despite being unregulated by the FCA (at least for the time being), the ASA guidance does confirm that cryptoassets will continue to be subject to the Advertising Code.  As such, and among a range of other matters, the ASA note that cryptoasset advertisers must clearly state (in a sufficiently clear and prominent way) that cryptoassets are not regulated by the FCA.  Advertisements must also contain sufficient information on the fact that cryptoassets do not benefit from any financial compensation scheme – so that potential investors are fully aware of the lack of protection afforded to them.   

The ASA guidance contains several high profile and recent examples of breaches of the Advertising Code, including examples of advertisers:

• taking advantage of consumers’ inexperience or credulity (rule 14.1);
• failing to include all material information – including that value is variable (rule 14.4);
• failing to make clear the unregulated nature of cryptoassets (as noted above); and
• failing to state the basis used to calculate any projections or forecasts (rule 14.3).

Cryptoassets are undoubtedly here to stay, and it remains to be seen what kind of regulatory framework comes into effect in the UK over the coming years.  In January this year however, the UK government did signal its intention to introduce specific legislation on the advertisement of cryptoassets, noting that new rules would increase consumer protection and encourage innovation.  

You can view the ASA guidance here [https://www.asa.org.uk/advice-online/cryptoassets.html]