Byline: Hannah Parke
The country’s Advertising Regulatory Board (ARB) has added a new clause that deals with cryptocurrency products and services features to the Code of Advertising Practice. South Africa’s new crypto clause protects consumers from being misled by unethical advertisers. It results from consultation and agreement with the cryptocurrency industry, with Luno playing a significant part as one of the leading crypto companies in South Africa. The country’s crypto ads must clarify that investing in crypto assets may lead to loss of funds and must re-echo the warning statement instead of downplaying it.
South African individuals and companies must abide by the advertising standards regarding the provision of cryptocurrency products and services in a newly introduced clause 17 of Section III of the country’s advertising code. The CEO of ARB, Gail Schimmel, noted, “This has been an exciting project, and we know that it will result in better protection for vulnerable consumers. The new crypto rules protect consumers from being misled by unethical advertisers and result from consultation and agreement with the cryptocurrency industry in South Africa.” Schimmel added, “This is a wonderful example of an industry that sees the harm that could be done in its name and steps up to self-regulate the issues without being forced to do so by the government.”
Luno is a cryptocurrency exchange founded in 2013 and a prominent service provider in South Africa. Insiders at Bitcoineer Official mentioned that the exchange has made efforts within the crypto investment space, education, and bringing crypto to over 11 million people in more than 40 countries across Asia, Africa, Australia, Europe and the US. Luno’s part in formulating crypto advertising guidelines in the country comes when the global crypto industry is looking to recover from a series of upheavals and fraudulent activities over the past year.
For instance, in 2020, Mirror Trading International CEO Johan Steynberg escaped the country with sole control of wallets containing around 23,000 Bitcoin that belonged to thousands of investors. In 2021 another South African investment scheme Africrypt made waves as another massive red flag as the two brothers claimed that a hacking incident resulted in the loss of $200 million worth of cryptocurrencies that the fund managed.
In October 2022, the Financial Sector Conduct Authority (FSCA) announced cryptocurrencies as a financial asset in South Africa, which opened a path to professionalise and regulate the crypto industry in the country. The move also allows authorities to take on scammers in the form of prison time and hefty fines.
According to General Manager for Africa at Luno, Marius Reitz, the rules around ethical advertising are non-negotiable for the crypto industry and a reason why Luno approached the regulatory body to develop new regulations alongside significant players in the local crypto industry. Reitz said, “We don’t want rogue advertisers making claims that mislead vulnerable consumers about the reality of crypto investment. Consumers must enter this exciting market with open eyes and realistic expectations.” Reitz added that “media platforms are understandably looking for advertisers, but we were concerned that they weren’t doing adequate due diligence on whether advertisers were above board”.
The New Clause in Detail
The new clause requires that advertisements clearly and plainly state that investing in crypto assets may result in capital loss as cryptocurrencies are notoriously volatile. Adverts must not hide warnings about potential investment losses. An advertisement of a particular product must explain its offerings clearly to its target audience and be balanced, which means that all the risks, returns, features, and benefits should be clearly stated and supported by adequate substantiation.
Historical performance of the crypto market must not be used to create a favourable future impression of the advertised product or service; it must be made clear that past performance is not indicative of future performance. Unregistered credit providers are not allowed to give or encourage the purchase of crypto assets on credit. When using influencers or ambassadors to promote a crypto asset product or service, it is essential that every piece of information they give is factual and must comply with Appendix K requirements. Ambassadors and influencers may not offer advice on investing or trading in crypto assets and may not promise benefits or returns.
In South Africa, ARB is a self-regulatory body of the advertising and public relations industry which has jurisdiction over companies and advertisers, whether they are members or not. The Supreme Court of Appeal in 2022 affirmed that every electronic broadcaster must follow the Code of Advertising Practice as administered and determined by the ARB. All electronic broadcast media advertising is subject to the Electronic Communications Act, 2005 (ECA).
The ARB’s new crypto advertisements clause plans to steer South Africa away from suspicious crypto entities, but adverts beyond the purview of the ARB will still be problematic. The Advertising Regulatory Board was set up to protect the South African consumer through the self-regulation of advertising, including packaging. The new crypto adverts clause protects unsuspecting users from being misled by unethical adverts and scammers. South Africa is taking steps to ensure that they clarify crypto advert clauses to their consumers.