On 8 October 2023 the FCA took over the regulation of ads for ‘qualifying cryptoassets’ – cryptoassets that are transferable and fungible, including cryptocurrencies and utility (fan) tokens – and introduced new rules. However, cryptoassets as a product remain unregulated. As of this date, complaints about misleading non-broadcast advertising for qualifying cryptoassets will be referred to the FCA for their consideration. The new rules do not cover cryptoassets that are non-fungible, such as Non-Fungible Tokens (NFTs), or Limited Payment Tokens that can only be redeemed with the issuer and used for the payments of specific goods and services, such as non-monetary customer loyalty points, and the ASA will continue to regulate all ads for these products.
Summary of Council decision:
Three issues were investigated, all of which were Upheld.
a. An Instagram ad, presented as an Instastory, featured on Eve Gale’s account and seen in June 2022. The story featured a video of Eve Gale who said, “Hey guys. So I just wanted to introduce you to a girl called Elizabeth who I recently met on my travels and she works in crypto. So saving and investing, and she literally breaks it down and makes it so much easier to understand. Teaches you guys how to make money from your phone in such an easy way. So I would definitely recommend. If you guys are interested all you have to do is send her a DM and tell her I sent you.”
b. An Instagram ad, presented as an Instastory, featured on Jessica Gale’s account and seen in June 2022. The story featured a video of Jessica Gale who said, “Hey guys I hope you are all good. Just quickly me and Eve have just been introduced to someone in Mykonos. She was so lovely. Her name is Elizabeth. She has introduced us to the world of crypto. So I knew nothing about this before but I was honestly blown away at how quickly her business has grown. It is basically a super quick, easy way of making extra money from your phone. And I am going to leave her tag there so if you interested you can drop her a DM, find out more about it. So safe and so easy. And yes say you guys came from me.”
1. The complainant challenged whether ads (a) and (b) were irresponsible because they trivialised investment in cryptocurrency.
The ASA challenged whether ads (a) and (b) were:
2. misleading because they failed to illustrate the risk of the investment; and
3. irresponsible because they took advantage of consumers’ inexperience or credulity.
elizabethh.od did not provide a substantive reply to the ASA’s enquiries.
Jessica and Eve Gale’s management said that for both posts it was made clear the material was an ad by using the labels “AD” and “#AD”. They said that was the first time they had promoted this type of service and they were unaware of the guidelines. However, that would also be the last time they advertise similar products.
They explained that Elizabeth approached the sisters to promote her Instagram page, which they were told helped people to get into cryptocurrency. They understood that cryptocurrency was a new way of investing, but had noted others who had promoted it on Instagram. They did not believe the promotion was intended to get people to invest money directly in cryptocurrency, but to reach out to Elizabeth as an expert, if they were interested in cryptocurrency.
They said Elizabeth was responsive, appeared genuine and paid on time and so they had no reason to be concerned about her. The sisters were sent a brief and a script, explaining what they should say and do for the ad. They were asked to follow the script in a chatty and organic style. Elizabeth also sent examples of other influencers promoting her services and that reassured them she had worked with influencers and social promotions before. Elizabeth did not mention the risks of cryptocurrency, and the previous examples also did not highlight that. The sisters understood that the promotion was solely about signposting viewers to Elizabeth’s page for people to find out more about cryptocurrency.
They explained that after reviewing the guidelines they acknowledged the risks of cryptocurrencies and investments in general and the need to handle promotions of them with caution. That was their first time dealing with such subject matter and going forward they would apply the guidelines.
The ASA acknowledged Jessica and Eve Gales’ explanation that they believed Elizabeth’s service provided information about cryptocurrency, but was not an investment service. However, we noted an Instastory on Elizabeth’s Instagram page that said, “TRADES AVAILABLE”, “SAME DAY RESULTS” and listed four amounts in dollars and what the return would be. A second Instastory said, “How are payments made to you for trades?” and “IF YOU ARE FROM THE USA, CASHAPP IS THE FASTEST AND EASIEST PAYMENT METHOD. IF YOU ARE ANYWHERE ELSE IN THE WORLD DOWNLOAD AND SIGN UP FOR THE CRYPTO.COM APP”. In addition, Elizabeth’s Instagram biography stated “Crypto”. We therefore considered on balance that the advertiser’s service included taking money for trading in cryptoassets. However, we noted that regardless of whether Elizabeth took money to make trades or just provided advice, the ads promoted investment in cryptoassets.
We understood cryptoasset investment was sophisticated and complex, subject to frequent change in value and one that could potentially lead to large losses. We noted that Jessica and Eve Gales’ Instagram accounts were general lifestyle accounts and not financial in nature. We therefore considered the ads were addressed to a general audience who were unlikely to have any specialist knowledge of investing in cryptoassets. We noted further that ad (a) stated, “Teaches you guys how to make money from your phone in such an easy way” and ad (b) stated, “a super quick, easy way of making extra money from your phone”. In addition, Jessica Gale in ad (b) explained that she knew nothing about cryptoassets before meeting Elizabeth. In the absence of any other information to the contrary, we considered that consumers would interpret the overall impression from the ads to mean that investment in cryptoassets was simple and risk free, even to those consumers who had only limited knowledge of cryptoassets.
Because we considered that the ad trivialised investing in cryptoassets by implying that investment was simple and straight forward for all, especially in the context of the intended audience who were likely to have limited knowledge of cryptoassets, we concluded the ads were irresponsible and breached the Code.
On that point, the ad breached CAP Code (Edition 12) rules 1.3 1.3 Marketing communications must be prepared with a sense of responsibility to consumers and to society. (Social responsibility)
The CAP Code required that marketing communications for investments made clear that the value of investments were variable and, unless guaranteed, could go down as well as up, and also that significant limitations and qualifications were stated and presented clearly. The ASA understood that cryptoassets were a volatile investment, subject to frequent change and one that could potentially lead to large losses.
We considered the ads were addressed to a general audience who were unlikely to have any specialist knowledge of investing in cryptoassets. We understood such an audience would expect cryptoasset investments to be regulated, with legal protection in place for investment activities.
Because the ads did not include any risk warning making consumers aware that cryptoassets could go down as well as up, or that the cryptoassets were unregulated in the UK we concluded that the ads were misleading.
On that point the ad breached CAP Code (Edition 12) rules
Marketing communications must not materially mislead or be likely to do so.
Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that the consumer needs to make informed decisions in relation to a product. Whether the omission or presentation of material information is likely to mislead the consumer depends on the context, the medium and, if the medium of the marketing communication is constrained by time or space, the measures that the marketer takes to make that information available to the consumer by other means. (Misleading advertising), 3.9 3.9 Marketing communications must state significant limitations and qualifications. Qualifications may clarify but must not contradict the claims that they qualify. (Qualification) and 14.4 14.4 Marketing communications must make clear that the value of investments is variable and, unless guaranteed, can go down as well as up. If the value of the investment is guaranteed, the marketing communication must explain the guarantee. (Financial products).
We considered that the general public, at whom the ads were targeted, were unlikely to be aware that Capital Gains Tax (CGT) had to be paid on profits from investing in cryptoassets once CGT allowances were exceeded. However, the ads did not contain any information that CGT could be payable on profits from investing in cryptoassets, and we considered the potential tax implications was not made sufficiently clear to consumers considering investing in cryptoassets.
For that reason we considered that the ads took advantage of consumers’ inexperience or credulity by not making clear that CGT could be payable on profits from investing. We therefore concluded the ads were irresponsible and breached the Code.
On that point, the ad breached CAP Code (Edition 12) rules 1.3 1.3 Marketing communications must be prepared with a sense of responsibility to consumers and to society. (Social responsibility), and 14.1 14.1 Offers of financial products must be set out in a way that allows them to be understood easily by the audience being addressed. Marketers must ensure that they do not take advantage of consumers' inexperience or credulity. (Financial products).
The ads must not appear again in the form complained about. We told elizabethh.od, Jessica Gale and Eve Gale to ensure that they did not trivialise the investment in cryptoassets by implying that it was straightforward or accessible to everyone and to not take advantage of consumer’s inexperience or credulity by not making clear CGT could be due on cryptoasset profits. We also told them to ensure that their future ads made sufficiently clear that the value of investments in cryptoassets were variable and could go down as well as up and that cryptoasset was unregulated.