Summary of Council decision:
Two in-app ads for Crypto.com, a payment and cryptocurrency trading platform:
a. The first ad, seen on 1 September 2021 in the Daily Mail app, included text which stated “Buy Bitcoin with credit card instantly.”
b. The second ad, seen on 30 July 2021 in the Love Balls app, included text which stated “Earn up to 3.5% p.a”. The number in the text increased to “8.5%”.
The ASA challenged whether:
1. ads (a) and (b) were misleading because they failed to illustrate the risk of the investment;
2. ads (a) and (b), were irresponsible and took advantage of consumers’ inexperience or credulity;
3. ad (a) was misleading because it failed to make clear limitations to purchasing cryptocurrency with a credit card;
4. the claim “Earn up to 8.5%” in ad (b) was misleading because the basis for calculating the earning forecast had not been made clear; and
5. the claim “Earn up to 8.5%” in ad (b) was misleading and could be substantiated.
1. Forisgfs UK Ltd t/a Crypto.com said that the ads had been removed voluntarily on first learning of the ASA’s concerns. They had enhanced the operational oversight of UK advertising and were drafting a new UK marketing policy that included the FCA’s Treating Customers Fairly outcomes for customer communications, more specifically outcomes 2 (products and services meet the needs of consumers) and 3 (providing clear information).
Crypto.com understood the ASA’s guidance stating that cryptocurrencies were not financial products to mean that advertising in that sector was not subject to section 14 (Financial Products) of the non-broadcast CAP Code.
Crypto.com said that ad (a) advertised the speed with which users could buy cryptocurrency on their platform; it was not an ad for cryptocurrencies as such.
Crypto.com said ad (b) referred to an offer for existing cryptocurrency users that allowed them to generate yield on their cryptocurrency holdings and therefore it did not advertise cryptocurrency itself. They explained that existing customers would be aware that investing in cryptocurrency came with risk.
Crypto.com said that ads limited by space could present qualifications “one-click” away as long as the headline claim was not materially misleading. They explained both ads directed users to the Crypto.com app which prompted consumers with a warning that stated “Past performance is not an indication of future results. Your capital is at risk” and “consider whether [cryptocurrencies] are suitable for [the user] in light of the [user’s] financial situation” and directed them to a detailed risk disclosure statement. On that basis, they believed the risk warning was suitably qualified.
2. Crypto.com said that the average consumer would understand that any profit made on an investment could be subject to tax. In addition as the ads were limited by time and space, they were not able to include tax information in them. However, they said details about tax were easily found on the website.
Crypto.com explained that ad (a) did not advertise cryptocurrency or encourage consumers to buy it. Instead, the ad highlighted the streamlined and user friendly service they offered to facilitate consumers buying cryptocurrency. They acknowledged that consumers who paid for cryptocurrency by credit card would have to pay the card off, but they believed that even inexperienced customers would understand that. They said that most consumers would not expect to pay back a credit card balance along with their purchases. They saw no reason to view cryptocurrency purchases any differently and that the ad was therefore not irresponsible.
3. Crypto.com acknowledged that credit card providers did differ in their approach to card transactions for cryptocurrency and that was not made clear in the ad. They explained that this was in part due to the limited space in the ad, but also because the terms and policies of individual credit card issuers were a private commercial matter between the companies and their customers. They further said that any higher fees or rates for cryptocurrency purchases, or outright prohibitions on buying cryptocurrency, were out of their control and information of which they would not necessarily have knowledge.
4. & 5. Crypto.com said that ad (b) promoted a service whereby holders of cryptocurrency could earn rewards for transferring their cryptocurrency assets from their cryptocurrency wallet to Crypto.com’s “Crypto Earn” tool. Any rewards were paid from Crypto.com’s treasury fund. On that basis, the advertised rate was the price that Crypto.com offered to pay to the customer and therefore was not a rate of interest, forecast or projection for which a calculation could be shown.
Associated Newspapers Ltd said that ad space for ad (a) had been sold by programmatic automatic transmission and they had not received any complaints about the ad.Lion Studios LCC (Love Balls) said that ad (b) was served by a third-party platform. Also, Lion Studios LCC did not review or pre-approve ads before being served. They were not aware of any complaints made about the ad.
The CAP Code required that marketing communications for investments made clear that the value of investments was variable and, unless guaranteed, could go down as well as up. It also required that significant limitations and qualifications were stated and presented clearly.
The ASA noted Crypto.com’s response that ad (b) was directed at existing cryptocurrency users who already had knowledge of the risks of cryptocurrency. However, the ads were shown in apps which we considered were likely to have 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.
We understood that cryptocurrencies in general were not regulated within the UK, and therefore consumers could not seek recourse to services such as the Financial Services Compensation Scheme or the Financial Ombudsman Service. The fact that cryptocurrency was unregulated we considered to be material information that consumers required in order to make informed decisions about Crypto.com’s service, and should have been made clear in the ad. We acknowledged that where an ad was constrained by time or space, the measures that the marketer took to make that information available to the consumer by other means were relevant when considering whether it was misleading. We understood both ads contained a hyperlink to an appstore where a consumer could download the Crypto.com app. It was not clear that ads (a) and (b) were constrained by space, but nevertheless neither of the landing pages on the Apple and Google appstores contained a qualification with information about cryptocurrencies being unregulated or the risk associated with investing.
Therefore because neither the ads (a) and (b), nor the landing pages from them, included 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 ads were misleading.
On that point, the ad breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.9 (Qualification) and 14.4 (Financial products).
We considered that the general public were unlikely to be aware that Capital Gains Tax (CGT) could be paid on cryptocurrency profits once annual tax free allowances were exhausted. Neither ad made reference to tax. We acknowledged Crypto.com’s comment that the space for the ads was limited and the website did contain information about tax. However, the ads did not link through to the website and there was no such information either, on the landing pages to where the ads linked. In addition while the website did contain details about the potential need to pay CGT on cryptocurrency gains, it was only found by accessing a link at the bottom of the Crypto.com home page.
Ad (a) stated “Buy Bitcoin with credit card instantly”, and we therefore considered it encouraged consumers to buy cryptocurrency on credit. We considered that for those consumers without cash or savings, the ad therefore encouraged buying cryptocurrency by taking out debt they would be unable to repay if there was no return on their investment. We understood cryptocurrency was highly volatile and could lead to large losses. Given the volatile nature of cryptocurrencies, we considered the potential amount of credit card debt could be significantly more than the subsequent value of the investment. We considered that, even where consumers held cash or savings, there was a risk that if the investment did not perform well, they could be unable to pay off their credit card.
For those reasons, we considered that the ad took advantage of consumers’ inexperience and credulity by not making clear tax could be paid on cryptocurrency profits and by irresponsibly encouraging investing in cryptocurrency on a credit card.
On that point, the ad breached CAP Code (Edition 12) rules 1.3 (Social responsibility), and 14.1 (Financial products).
The CAP Code stated that marketing communications must not mislead the consumer by omitting material information. Where a marketing communication was constrained by time or space, the measures that the marketer took to make that information available to the consumer by other means were relevant when considering whether it was misleading.
Ad (a) stated “Buy Bitcoin with credit card instantly”, which we considered encouraged consumers to purchase cryptocurrency with a credit card. We understood that purchases of cryptocurrencies on a credit card could be subject to a higher cash interest rate, and if considered a cash advance, a cash advance fee would have been due, which could be noted on a credit file and affect future borrowing. In addition some credit card issuers did not allow users to buy cryptocurrency. We considered that information was likely to be material to consumers to be made aware of, and there was nothing in the ad, or the appstore page to which the ad linked, that made this information clear. We therefore concluded that the ad was misleading.
On that point, the ad breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.9 (Qualification).
4. & 5. Upheld
We understood that consumers would interpret the claim “Earn up to 3.5% p.a.” which increased to “Earn up to 8.5% p.a.” to mean that any deposit could increase by the highest amount shown.
We acknowledged that Crypto.com’s Earn facility offered existing holders of cryptocurrency an annual rate to transfer cryptocurrency to Crypto.com and hold it with them. The rate was dependent on the amount and type of cryptocurrency transferred and the length of the term of the deposit. We also noted Crypto.com’s comments that the figures advertised in ad (b) were a “reward” and therefore not interest, a forecast or a projection.
However, we considered the ad did not make clear that the claim “Earn up to 3.5% p.a.”, which increased to “Earn up to 8.5% p.a.”, referred to a return on cryptocurrency or that the rate depended on the type of cryptocurrency, the amount transferred or the period held with Crypto.com. That notwithstanding, we had also not seen any evidence to substantiate that 8.5% per year would be paid.
Therefore, because the basis used to calculate the figure was not clear and because Crypto.com had not substantiated the reward rate, we concluded the ad was misleading.
On that point, the ad breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.7 (Substantiation) and 14.3 (Financial products).
The ad must not appear again in the form complained about. We told Forisgfs UK Ltd t/a Crypto.com 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 cryptocurrency was unregulated.
We told them to ensure that their future marketing communications did not irresponsibly take advantage of consumers’ lack of experience or credulity by irresponsibly encouraging investing in cryptocurrency using a credit card, and by not making clear that CGT was not due in some circumstances on cryptocurrency profits.
We told them that future ads must make clear that the purchase of cryptocurrency using a credit card could be subject to higher interest rates, extra fees and that some credit card issuers prohibit the buying of cryptocurrency.
We told them to ensure that the basis of any projection in their ads was made clear and that they held adequate substantiation to support their claims.