Background
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:
Two issues were investigated, both of which were Upheld.
Ad description
A paid-for Reddit ad for Skrill, an online wallet and money transfer service, seen on 31 July 2021. The ad included text which stated “Want to try making a profit on crypto without risking your money? Sign up now and give crypto a go, for free. If the value goes up the profits are yours to keep.* *Profits capped at £25”. The ad also included a video which contained text that stated “Want to try crypto risk-free?” and “Join Skrill. Try crypto. Risk nothing”.
Issue
1. The complainant challenged whether the promotion was irresponsible because it took advantage of consumers’ inexperience or credulity.
2. The ASA challenged whether the ad was misleading because it failed to illustrate the risk of investing in cryptocurrencies.
Response
1. Skrill Ltd said that the promotion offered a free promotional balance to users in pounds sterling. The subsequent value of the balance was determined by the performance of the chosen cryptocurrency over the course of the limited promotional period. If the balance increased, the customer was entitled to an e-profit up to the maximum value of £25. If the balance decreased over time, the user suffered no loss and did not incur a liability to Skrill. Participants were not given rights or interest in actual cryptocurrency and Skrill did not purchase any cryptocurrency to fund the promotion.
Skrill said that they were an authorised electronic money institution providing electronic money payment accounts, as well as other electronic money related products and payment services.
Skrill said that they operated a Cryptocurrency Service that allowed customers to buy and sell an interest in cryptocurrencies by accessing partner cryptocurrency exchanges. They explained the promotion in question did not need the consumer to use the Skrill Cryptocurrency Service and so they were not exposed to the risks that came with it.
Skrill said that the primary function of the ad was to advertise the possibility of receiving free electronic money. That money could then be used by the participant in accordance with the functionalities of Skrill’s services. Users had the option to withdraw any money earned through the promotion to their own bank account or spend the money via a range of merchant websites that accepted Skrill payments. On that basis their Cryptocurrency Service was only one of the many services offered by Skrill and was not the primary function. Therefore they believed the ad was not about investing in cryptocurrency but about the possibility of earning free electronic money.
Skrill did not believe the promotion suggested that cryptocurrency could be traded without risk. The promotion itself did not involve trading in actual cryptocurrency but allowed a customer to make a profit on a hypothetical cryptocurrency with no financial risk. They explained that any future opportunities to trade cryptocurrencies with the Skrill Cryptocurrency Service outside the promotion involved detailed and transparent information provided to consumers. This included users of their Cryptocurrency Service accepting the Skrill Cryptocurrency Service Terms and Conditions and Risk Statement which informed the consumer of the risks of cryptocurrency. Further to that, customers who logged in, made transactions and engaged with the customer interface were also provided with risk warnings.
2. Skrill said the promotion itself, as distinct from their Cryptocurrency Service, involved no investment in cryptocurrency and therefore no risk. If the customer went on to use the Cryptocurrency Service they would have been made aware of the risk of cryptocurrency.
Skrill said that the ad was about the possibility of obtaining free electronic money, which did not fall under the scope of financial promotion regulations. Therefore the ad was not a marketing communication for either cryptocurrency or any other investment product.
Skrill said that there was no evidence to suggest that consumers who saw the ad did not have experience or knowledge of cryptocurrencies.
Skrill said they had removed the promotion from all distribution channels in the United Kingdom.
Assessment
1. Upheld
The ASA acknowledged that for the purpose of the promotion, users were allocated a notional balance in the cryptocurrency of their choice. Therefore, consumers would neither own cryptocurrency nor be exposed to the risks that came with the investment in cryptocurrencies. However, we understood that to participate in the promotion a user would have had to open a Skrill account. Any potential profit would have been credited to that account, which would provide them with the ability to trade in cryptocurrency. The ad stated “Want to try crypto risk-free?”, “Want to try making a profit on crypto without risking your money?”, “Sign up now and give crypto a go, for free” and “Join Skrill. Try crypto. Risk nothing”. Notwithstanding that the promotion did not require participants to purchase cryptocurrency directly, we considered the impression provided by those references suggested that investing in cryptocurrency was simple and conventional, and could be done without risk.
We noted that Skrill offered a range of electronic money services, separate from purchasing cryptocurrency, where any potential earnings from the promotion could be used. Nevertheless the promotion was about the potential to make gains on cryptocurrency and any profit was paid into an account that had the option to be used for investing in cryptocurrency.
We understood that cryptocurrency was a complex and sophisticated investment, subject to frequent change in value and one that could potentially lead to large losses. We therefore considered the decision to open an account, with the potential to invest in such a financial product and which would expose participants to that risk, was one that required careful thought and consideration. We considered that the impression given by the ad, that investing in cryptocurrency was simple and conventional, and which did not offer any immediate warnings in the ad about the overall risk of cryptocurrency investment itself, encouraged consumers to engage in a high risk investment without consideration and took advantage of their inexperience and credulity.
Because the promotion took advantage of consumers’ inexperience or credulity, we concluded it 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).
2. Upheld
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, and also that significant limitations and qualifications were stated and presented clearly. We noted Skrill’s comments that the ad was promoting the issuing of free electronic money and therefore was neither about cryptocurrency nor any other investment. However, the promotion was focused on investing and profiting from a hypothecated cryptocurrency investment, and if consumers made a profit due to the value of the chosen cryptocurrency increasing, that would likely suggest that they could make a profit by investing in a cryptocurrency for real. Although users were not using actual cryptocurrency during the promotion, it served as an introduction to investing in cryptocurrency, and we considered that the ad was a marketing communication for an investment for that reason. In addition, any money made through the promotion was paid into a Skrill account that offered the user the option to buy cryptocurrency.
We considered that the audience was unlikely to have extensive financial knowledge and experience of cryptocurrencies and would expect that the exchange of cryptocurrencies would be regulated, with legal protection in place for investment activities. However, we understood that cryptocurrency in general was not regulated in the UK and was not subject to the protections afforded by the Financial Services Compensation Scheme or the Financial Ombudsman Service.Because the promotion required users to open a Skrill account and any profit would have been paid into that account, it meant consumers had the opportunity to invest in cryptocurrency and would have been exposed to the risks of cryptocurrency. We considered the fact that cryptocurrency was unregulated to be material information that consumers required in order to make an informed decision about participating in the promotion, and should have been made clear in the ad. Therefore, because the ad did not include any risk warning making consumers aware that cryptocurrency could go down as well as up, or that 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 and 3.3 (Misleading advertising), 3.9 (Qualification) and 14.4 (Financial products).
Action
The ad must not appear again in the form complained about. We told Skrill Ltd to ensure that they did not irresponsibly take advantage of consumers’ lack of experience or credulity by implying that cryptocurrency investment was risk free. We also told them 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.
