What South Africa’s New Crypto Ad Regulation Means By DailyCoin
© Reuters What South Africa’s New Crypto Ad Regulation Means
- South Africa’s Advertising Regulatory Board has issued new guidelines to protect the public and ensure transparency in crypto advertising.
- The guidelines mandate that crypto advertisements must state that investing in crypto assets may result in a loss of capital.
- Influencers and brand ambassadors must comply with advertising standards on crypto investments.
On Monday, January 23rd, 2023, the South Africa Advertising Regulatory Board (ARB) issued updated guidelines for advertising in the cryptocurrency sector. The new clause aims to protect the South African public from unethical advertising and ensures maximum transparency.
The code of advertising practice requires all crypto asset advertisements to clearly and expressly state that investing in crypto assets may result in the loss of capital as the value is variable and inherently volatile.
Consequently, cryptocurrency asset advertisements should directly communicate that “Investing in Crypto assets may result in the loss of capital.”
Cryptocurrency assets are often regarded as high-risk, high-reward opportunities. The updated ARB guidelines aim to facilitate clearer communication from crypto projects to the public. The ARB asserts that crypto advertisements need to inform the public that they could potentially face significant losses due to the inherent volatility of crypto markets.
The Fall of the Arbitrary Crypto Influencer
According to the updated crypto advertising clause, social media influencers and brand ambassadors must comply with advertising standards when promoting cryptocurrency products and services.
The updated ARB regulations require influencers and ambassadors to share factual information only. Furthermore, they are prohibited from offering advice on trading, investing in crypto assets, or guaranteeing benefits or returns.
Discussion around crypto advertisement regulations has become more prominent in the space after several incidents in which the public was subject to misinformation. Reality TV star Kim Kardashian was charged over $1M by the Securities and Exchange Commission (SEC) for promoting the EthereumMax (EMAX) scam project.
In a separate case, Madonna, Jimmy Fallon, and Future were among the celebrities targeted by a class-action lawsuit regarding Yuga Labs (Bored Ape Yacht Club creators) and Moonpay NFT marketing campaigns. The aforementioned entities were charged with using celebrities to promote and sell NFTs by misleading investors.
The decision by South African regulators to crack down on crypto ad regulations was purportedly influenced by the 2021 Steynberg scandal. Johan Steynberg, the CEO of MTI, fled the country with 23,000 rug-pulled from thousands of investors after “operating a fraudulent commodity pool.”
The lack of guidelines and regulations thus far has resulted in several incidents where the public was misled by erroneous or deceptive information. In this way, the ARB hopes to avoid future recurrences of such events through more stringent regulation.
The Right Way to Advertise Crypto Assets
According to the ARB guidelines, a crypto advertisement should comply with all relevant regulations and be comprised of the following prerequisites:
The regulatory update is an effort by the government in association with the ARB to protect consumers from any potential fraud or misinformation related to cryptocurrency assets.
Protecting the South African Public
Gail Schimmel, CEO of the ARB, submitted a press release to a South African review site in which she stated:
“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.”
Section III of the Crypto Assets clause states that companies and individuals offering cryptocurrency products and services are required to abide by specific advertising standards as set apart in the aforementioned document.
Crypto advertisements must clearly state that investments may result in financial loss and present services and products to be clearly understood by the intended audience. Advertisements for crypto assets must also provide critical information about returns, features, benefits, and risks and adequately substantiate rates of return, projections, or forecasts.
Furthermore, unregistered credit providers cannot encourage the acquisition of cryptocurrencies using credit but can advertise associated payment methods.
South Africa is amongst pioneering countries seeking to regulate crypto publicity to ensure ads and marketing materials are transparent, accurate, and not optimistic in any misleading way.
On the Flipside
- Influencers and ambassadors who promote cryptocurrency products and services are not required to register or be regulated by any financial body in South Africa. This makes it considerably more complicated to enforce regulations.
- Beyond the updated regulations, crypto enthusiasts remain responsible for conducting thorough research on any crypto asset opportunity they are interested in.
Why You Should Care
As a developing country, South Africa’s efforts to standardize and regulate advertising related to cryptocurrencies indicate an increase in global adoption.
Read more about the $1.7B Bitcoin fraud and Johan Steynberg:
South African Based Company Charged With Record $1.7B Bitcoin Fraud By CFTC
Read more about Coinbase (NASDAQ:) CEO Brian Armstrong’s ideas for global crypto regulation:
Coinbase CEO Brian Armstrong Outlines “Realistic Blueprint” for Global Crypto Regulation
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