Advertising Standards Authority (ASA), an advertising watchdog in the UK, called out cryptocurrency ads for not providing enough information about the risks of investing in cryptocurrencies, which can include fraud, volatility, and unrealistic profit margins. It not only banned seven ads in December, but also two ads in January.
While cryptocurrency can be immensely profitable for investors who know how to buy and sell them, they can result in serious losses for consumers who have little understanding of how the market works. Consequently, the ASA is cracking down on companies that target naive consumers with deceptive advertising.
5 Main Reasons for the ASA Bans
The ASA considers the following types of advertisements as misleading.
- Advertising that takes advantage of consumers and exploits the uninformed about the benefits of cryptocurrency investments.
Since many consumers are unaware of how powerful marketing can be and do not know how to protect themselves from companies that can take advantage of them, ruthless companies abuse this lack of experience and knowledge about cryptocurrency. Using questionable promotional tactics, they lure people into buying cryptos, and then abandon them with no after-sales support. This leaves buyers feeling cheated and confused. Companies can exploit consumers in many ways. For instance, some companies prey on the human tendency to trust authority figures on how to invest and use it to their advantage.
- Advertising that portrays cryptocurrency that has no entry barriers and a way to make money fast.
The ASA frowns on businesses that exaggerate the upside of cryptocurrencies without also mentioning the downsides of investments. Consumers are later surprised to learn that the prices of cryptocurrencies fluctuate frequently and investing in cryptocurrencies comes with a substantial amount of risk.
- Advertising that does not provide sufficient information.
The crypto market today is a volatile and risky place to invest. Because of this, many companies won’t reveal details about their investments for fear of getting targeted by the government. Additionally, it’s irresponsible for companies not to tell investors about capital gains tax on cryptocurrencies.
- Advertising that does not clearly illustrate investment risks
The ASA warns companies against making misleading statements about cryptocurrencies. Investors should know the risks of investing in a company before they sign on the dotted line. As people look for ways to diversify their portfolios, cryptocurrency is becoming a new type of investment. Although there are no regulations, companies shouldn’t be careless about informing consumers that it’s equally possible for prices to drop as well as go up.
5 Advertising that fails to clarify that past performance is not a guarantee of future success.
Some investors don’t read financial statements carefully enough and are under the naïve impression that if a cryptocurrency has done well in the past, it will always keep doing well. By only mentioning the highlights of a cryptocurrency, many crypto companies encourage the idea that success is almost guaranteed.
The ASA Wants Honest Advertising
Today’s marketing tactics are more sophisticated than ever. As a consumer watchdog, ASA screens for language and images that mislead consumers about crypto investing. Besides banning false ads, they’re also trying to educate the public about the hidden dangers of advertising dangers.
The ASA believes crypto companies should be honest with their customers and not trick them into thinking they are always getting a good deal. While cryptocurrencies aren’t regulated, they are still investments. Consequently, companies should not let their salespeople give investment advice without proper training in how market forces really work.