Summary of Council decision:
Two issues were investigated, both of which were Upheld.
A video on the Wingin’ It! Paul Lucas YouTube channel, seen in August 2021, titled “18 HOURS in Singapore Airlines BUSINESS CLASS! (Singapore-Tokyo-Los Angeles)”. The description had text that stated “Download EXMO now and save LOADS on trading commissions!* *EXMO HAS been given Temporary Registration to carry out crypto-asset activities”. The video included a section which stated “Today’s video sponsor is EXMO, a cryptocurrency exchange … If you are like me and new to the whole idea. EXMO is a great place to start your trading journey. You see EXMO doesn’t bamboozle you with a million charts or expect you to be a trading whizz. The nice clear simple trade tab is designed specifically for people who buy crypto for the first time”. During that section on-screen text stated “Sign up with the link in the description” and “Get $100 advanced cashback FREE!”.
The ASA challenged whether the ad was:
1. misleading because it failed to illustrate the risk of the investment; and
2. irresponsible because it took advantage of consumers’ inexperience or credulity and trivialised investment in cryptocurrency.
1. & 2. Exmo Exchange Ltd t/a EXMO said the ad did not state that investing in cryptocurrency guaranteed profit or that you could obtain an income from such an investment. They said they did not direct viewers to invest in cryptocurrency excessively to their own detriment.In addition, EXMO said, there was no indication in the video that investing in cryptocurrency should be done for personal financial gain, that it should be conducted in a way that was high risk or a form of gambling and that a significant part of a person’s finances should be used. For those reasons, and because the video made no comment about the financial results (profit or loss) for the audience of investing in cryptocurrency, EXMO believed it did not require qualification or a risk warning.
EXMO said that they assumed the audience for the video was well-informed, observant and circumspect. They treated the viewers as reasonable and sensible individuals, people who were rational and moderate when it came to their finances. Therefore they believed there was no need to be concerned that the intended audience would be negatively impacted by an ad for cryptocurrency.
EXMO said that their service was set out in the video in a straight forward way and there was no intent to take advantage of consumers’ inexperience or credulity. They explained that their platform was intended to be accessible to those new to cryptocurrency and provide a range of services to support them.
They said that the promotion in the video, for viewers to get a $100 advanced cashback free, meant that those who signed up would get a $100 of cashback balance on their account which could be used for trading commissions.EXMO explained that when the video was released EXMO was under the Temporary Registration Regime by the Financial Conduct Authority (FCA). However, since then they had withdrawn their application and undergone a legal reorganisation of their business structure.
EXMO said that cryptocurrency profits were subject to Capital Gains Tax in the United Kingdom, but there was a capital gains allowance of £12,300. They believed that their target audience, retail customers, were unlikely to trade in such volume that their profits would exceed this threshold. Nonetheless, EXMO said they recognised that some consumers could generate capital gains from other sources and this could cause their total capital gains to exceed the allowance. To this end their user agreement, which they said was visible on the website and presented to all consumers who wanted to trade, did make consumers aware of their potential tax obligations.
Paul Lucas confirmed that this was the first sponsorship he had done for cryptocurrency and he had relied on EXMO to ensure that the ad was compliant with the rules around financial advertising.
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 cryptocurrency was a volatile investment, subject to frequent change and one that could potentially lead to large losses.We noted that the Wingin’ It Paul Lucas YouTube channel was a dedicated travel and transport channel. We therefore considered the ad was addressed to a general audience who were unlikely to have any specialist knowledge of investing in cryptocurrency. We considered such an audience would expect cryptocurrency investments to be regulated, with legal protection in place for investment activities.
The ad stated “*EXMO HAS been given Temporary Registration to carry out crypto-asset activities”. However, while we understood EXMO had Temporary Registration with the FCA at the time the video was published, that status did not provide for any consumer protection powers by the FCA because cryptocurrency services in general were not regulated within the UK. Investors, therefore, would not be subject to protections afforded by either the Financial Ombudsman Service or the Financial Services Compensation Scheme.
Because the ad did not include any risk warning making consumers aware that cryptocurrency could go down as well as up, or that the cryptocurrency was unregulated in the UK we concluded that the ad was misleading.
On that point the ad breached CAP Code (Edition 12) rules 3.1, 3.3 (Misleading advertising), 3.9 (Qualification) and 14.4 (Financial products).
We acknowledged EXMO’s explanation that their platform was accessible to those new to cryptocurrency and the claim “If you are like me and new to the whole idea. EXMO is a great place to start your trading journey. You see EXMO doesn’t bamboozle you with a million charts or expect you to be a trading whizz. The nice clear simple trade tab is designed specifically for people who buy crypto for the first time”, was made in that context. However, we understood cryptocurrency investment itself was sophisticated and complex, subject to frequent change in value and one that could potentially lead to large losses. In the absence of any other information to the contrary, we considered that consumers would interpret the overall impression from the ad to mean that investment in cryptocurrency was simple and risk free even to those consumers who had only limited knowledge of cryptocurrencies.We considered that the use of the promotion in the ad, “Get $100 advanced cashback FREE!”, was a strong incentive for consumers to invest in cryptocurrency. However, given the lack of visible risk warning in the ad, the instability of cryptocurrency and the losses it could expose a consumer to, we considered that the use of a cashback promotion to encourage investment in cryptocurrency in this instance trivialised, and was a distraction from, what was a serious and potentially costly financial decision and took advantage of consumers' inexperience or credulity.
We considered that the general public were unlikely to be aware that Capital Gains Tax (CGT) had to be paid on profits from investing in cryptocurrency once CGT allowances were exceeded. We acknowledged that EXMO had included information about tax in their user agreement on their website. However, the ad did not contain any information that CGT could be payable on profits from investing in cryptocurrency, and we considered the potential tax implications was not made sufficiently clear to consumers considering investing in cryptocurrency.
Because we considered that the ad took advantage of consumers’ inexperience or credulity by suggesting that investing in cryptocurrency was simple, trivialising investment in cryptocurrency and by not making clear that CGT could be payable on profits from investing, especially in the context of the intended audience who were likely to have limited knowledge of cryptocurrency, we concluded the ad was irresponsible and breached the Code.
On that point, the ad breached CAP Code (Edition 12) rules 1.3 (Social responsibility), and 14.1 (Financial products).
The ad must not appear again in the form complained about. We told Exmo Exchange Ltd t/a Exmo to ensure that their future ads made sufficiently clear that the value of investments in cryptocurrency was variable and could go down as well as up and that Exmo Exchange Ltd and cryptocurrency were unregulated. We also told them to ensure that they did not irresponsibly take advantage of consumers’ lack of experience or credulity by implying that cryptocurrency investment was straightforward or accessible to everyone, or by not making clear that tax could be due on cryptocurrency profits. We told them to ensure they did not trivialise investment in cryptocurrency.