Disclaimer: The article was updated to include comments from Binance and VALR, attributed to their respective spokesperson.
South Africa’s Advertising Regulatory Board (ARB) has included a new clause for the cryptocurrency industry aimed at protecting consumers from unethical advertising.
Companies and individuals in South Africa must abide by certain advertising standards pertaining to the provision of cryptocurrency products and services in a new clause introduced to Section III of the country’s advertising code.
The first clause requires that adverts, including cryptocurrency offerings, must ‘expressly and clearly’ state that investments may result in the loss of capital ‘as the value is variable and can go up as well as down.’ Furthermore, adverts must not contradict warnings about potential investment losses.
Advertising for particular services and products must be explained in an ‘easily understandable’ manner for intended audiences. Adverts must also give balanced messages around returns, features, benefits and risks associated with the associated product or service.
Rates of returns, projections or forecasts must also be adequately substantiated, including how these are calculated and what conditions apply to touted returns. Any information relating to past performance cannot be used to promise future performance or returns, and should not be presented in a way that creates ‘a favourable impression of the advertised product or service.’
Adverts from cryptocurrency service providers that are not registered credit providers should not encourage the acquisition of cryptocurrencies using credit. However this does not preclude the advertising of associated payment methods provided by service providers.
Social media influencers and brand ambassadors will also be expected to comply with certain advertising standards. This includes being required to share factual information while being prohibited from offering advice on trading or investing in crypto assets and the prohibition of promises of benefits or returns.
Cryptocurrency exchange Luno, a prominent service provider in South Africa, spearheaded the project with the ARB. Luno’s GM for Africa Marius Reitz told Cointelegraph the exchange approached the regulatory body to develop new rules alongside major players in the local crypto industry.
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Reitz said that the industry is looking to take a self-regulatory approach and that consumers should be cognisant of risks involved in cryptocurrency investing. Scams and frauds have preyed on unsuspecting investors in the country, necessitating an effort to ‘clean up the industry’ by making it more difficult for scammers to operate:
“Media platforms are understandably looking for advertisers, but we were concerned that they weren’t doing sufficient due diligence on whether advertisers were above board.”
VALR is another prominent South Africa exchange that was involved in the initiative with the ARB. VALR co-founder and CEO Farzam Ehsani told Cointelegraph that unscrupulous actors have ‘perpetuated grave injustices’ behind the guise of being ‘crypto companies’ in the past which led to industry proponents to come together.
Ehsani said VALR’s goal has been to improve financial systems and create a ‘global system based on unity and not fragmentation’ and that the advertising guidelines would help to that end:
“Our focus is still very much based on this vision, and it is in everyone’s interests to ensure that the public is provided with factual and accurate information.”
A spokesperson from Binance told Cointelegraph that its operations in the country were in support of the ARB guidelines on cryptocurrency advertising, highlighting industry shortcomings in the past in South Africa:
“There have been some misleading communications in the past, so we will support any clauses that set a clear standard for advertising going forward.”
A statement shared with Cointelegraph from ARB CEO Gail Schimmel highlighted her belief that the project would result in better protections for ‘vulnerable consumers’ in South Africa:
“This is a wonderful example of an industry that sees the harm that could be done in its name, and steps up to self-regulate the issues without being forced to do so by government.”
Cryptocurrency investors globally have fallen prey to some major scams in recent years. In South Africa, Mirror Trading International grabbed headlines through 2020 and 2021 as its CEO Johan Steynberg fled the country with sole control of wallets containing around 23,000 Bitcoin (BTC) belonging to thousands of investors.
Africrypt was another South African investment scheme that turned sour on investors in 2021, with brothers Raees and Ameer Cajee claiming that a hacking incident had led to the loss of some $200 million worth of cryptocurrencies being managed by the fund.