South African Advertising Regulatory Council Creates Guidelines On How To Advertise Crypto To Protect Consumers

Crypto advertisements in South Africa must include risks and dangers. (photo: dock. forest.news)

JAKARTA - The South African Advertising Regulatory Council (ARB) has included a new clause for the cryptocurrency industry aimed at protecting consumers from unethical advertising.

Companies and individuals in South Africa must comply with certain advertising standards relating to the provision of cryptocurrency products and services in a new clause introduced in Part III of the country's advertising code.

The first clause requires that advertisements, including offers of cryptocurrencies, must 'unequivocally and clearly' state that the investment may result in a loss of capital 'as values ​​vary and may increase or decrease.' In addition, advertisements must not conflict with warnings about potential loss of investment.

Advertisements for certain services and products should be explained in a way that is 'easy to understand' for the intended audience. Ads must also provide a balanced message around the returns, features, benefits, and risks associated with the associated product or service.

Rates of return, projections or forecasts must also be adequately demonstrated, including how these are calculated and what conditions apply to the stated returns.

Any information relating to past performance cannot be used to promise future performance or returns, and must not be presented in a manner that creates a 'favorable impression of the advertised product or service.'

Ads from cryptocurrency service providers who are not registered credit providers may not encourage cryptocurrency acquisition using credit. However, this does not prevent advertisements regarding payment methods provided by service providers.

Social media influencers and brand ambassadors are also expected to adhere to certain advertising standards. They include parties required to share factual information, while prohibited from offering advice about trading or investing in crypto assets and prohibited from promises of benefits or returns.

Cryptocurrency exchange Luno, a leading service provider in South Africa, is spearheading the project with ARB. Luno's GM for Africa, Marius Reitz told Cointelegraph that the exchange approached the watchdog to develop new rules with major players in the local crypto industry.

Reitz said that the industry wants to take a self-regulatory approach and consumers should be aware of the risks involved in cryptocurrency investing. Scams and counterfeiting have preyed on unsuspecting investors in the country, so efforts are needed to 'clean up the industry' by making it harder for fraudsters to operate:

“Media platforms are definitely looking for advertisers, but we are concerned that they are not doing sufficient due diligence on whether advertisers are above board,” said Reitz.

A statement shared with Cointelegraph from ARB CEO Gail Schimmel also highlights his belief that the project will lead to better protection for 'vulnerable consumers' in South Africa.

"This is an outstanding example of an industry seeing the harm it can do to its name, and stepping in to self-regulate the problem without being forced to do so by the government," Schimmel said.

Crypto currency investors globally have fallen prey to several major scams in recent years. In South Africa, Mirror Trading International made headlines throughout 2020 and 2021 as its CEO Johan Steynberg fled the country with sole control of a wallet containing around 23.000 Bitcoin belonging to thousands of investors.

Africrypt is another South African investment scheme that hurt investors in 2021, with two brothers, Raees and Ameer Cajee, claiming that a hacking incident led to the loss of USD 200 million worth of cryptocurrency managed by the fund.