The South African Advertising Regulatory Board (ARB) has included a new clause for the cryptocurrency industry aimed at protecting consumers from unethical advertising.
Businesses and individuals in South Africa are required to comply with certain advertising standards in relation to the provision of cryptocurrency products and services in a new clause introduced in Section III of the country’s Advertising Code.
The first clause requires that advertisements, including cryptocurrency offerings, must state “explicitly and clearly” that investments may result in a loss of capital “as value is variable and can go down as well as up”. In addition, advertisements must not contradict warnings of possible investment losses.
Advertising for certain services and products must be explained in an “easily understandable” manner for the target groups. Ads must also convey balanced messages about returns, features, benefits, and risks associated with the associated product or service.
Return quotas, projections or forecasts must also be adequately justified, including how they are calculated and what conditions apply to advertised returns. Any information relating to past performance cannot be used to promise future performance or returns and should not be presented in a way that creates “a positive impression of the advertised product or service”.
Advertisements from cryptocurrency service providers that are not registered credit providers should not encourage the purchase of cryptocurrencies on credit. However, this does not preclude the promotion of connected payment methods provided by service providers.
Social media influencers and brand ambassadors are also expected to adhere to certain advertising standards. These include the obligation to pass on factual information, the ban on offering advice on trading or investing in crypto assets, and the ban on promises of benefits or returns.
Cryptocurrency exchange Luno, a well-known service provider in South Africa, led the project with the ARB. Marius Reitz, Luno’s GM for Africa, told Cointelegraph that the exchange has reached out to the regulator to work with key players in the local crypto industry to develop new rules.
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Reitz said that the industry is aiming for a self-regulatory approach and that consumers should be aware of the risks associated with cryptocurrency investments. Scams and scams have plagued unsuspecting investors in the country, necessitating an effort to “clean up the industry” by making it harder for scammers to operate:
“Media platforms are understandably looking for advertisers, but we were concerned they weren’t doing enough due diligence to verify that advertisers were decent.”
A statement shared to Cointelegraph by ARB CEO Gail Schimmel underscored her belief that the project would result in better protections for “vulnerable consumers” in South Africa:
“This is a wonderful example of an industry that sees the harm that could be done on its behalf and strives to self-regulate the issues without being coerced by the government.”
Cryptocurrency investors worldwide have fallen victim to some major scams in recent years. In South Africa, Mirror Trading International made headlines through 2020 and 2021 when its CEO, Johan Steynberg, fled the country with sole control of wallets containing around 23,000 Bitcoin (BTC) owned by thousands of investors.
Africrypt was another South African investment scheme to piss off investors in 2021, with brothers Raees and Ameer Cajee claiming that a hacking incident resulted in the loss of around $200 million worth of cryptocurrencies managed by the fund will.