The UK Advertising Standards Authority (“ASA“) published new guidance on the application of the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (“CAP Code“) to crypto-assets (including NFTs) as well as an enforcement notice, sent to over 50 companies which advertise cryptocurrencies, instructing them to review their ads and to ensure they understand and are complying with the rules so that consumers are treated fairly.

These steps add to a recent publication by the UK Financial Conduct Authority (“FCA“) of a consultation paper (“the Paper“), setting out its proposals to strengthen its financial promotion rules for crypto-assets and other high-risk investments.

These regulatory developments join a continuing regulatory trend around the world of an increased attention and enforcement concerning the promotion of crypto-assets and crypto-asset related services (see our related recent update).

According to the Paper, the FCA sees cryptoassets and related services, as well as the advertising of such, as posing an increased risk to consumers. Therefore, within the framework of the Paper, the FCA had indicated that it intends to apply the same rules to crypto-assets as currently apply to non-readily realizable securities and P2P agreements. Those rules include the requirements for the promotion to be clear, fair and not misleading. In addition, the FCA has proposed a range of measures designed for “first-time investors” including strengthening risk warnings with prescribed language and risk information, banning inducements to invest, personalized risk warnings and a 24-hour cooling-off period. The FCA intends to publish its policy statement and final rules in the summer of 2022.

Likewise, the ASA had announced that it is working closely with the FCA, and provided its guidance to the crypto industry. According to the ASA, crypto-related advertisement must meet the following requirements:

• Clearly state that cryptocurrencies are unregulated in the UK and that the value of investments is variable and could decrease;
• Must not state or imply that investment decisions are trivial, simple, easy or suitable for anyone;
• Must not imply a sense of urgency to buy, create a fear of missing out, or state that investments are ‘low risk’; and
• Must not imply past performance as an indication of future returns.

The ASA states that misleading crypto advertisements are considered as “a ‘red alert’ priority issue“, and noted that if crypto companies will not comply with the advertising regulations by 2 May 2022 it will take “targeted enforcement action”, which includes reporting to the FCA.

Please feel free to contact us if you have any questions regarding the compliance of your business with the constantly evolving regulations in the crypto-asset space in general, and with regulations applicable to the promotion of your crypto-asset business in particular.

Kind regards,

Ariel Yosefi, Partner
Head of Technology & eCommerce Regulation