New rules for crypto ads in South Africa – including warnings that you could lose your money

 ·23 Jan 2023

South Africa’s Advertising Regulatory Board (ARB) has added a new clause to its Code of Advertising Practice dealing with cryptocurrency products.

The new rules are aimed at protecting consumers from being misled by unethical advertisers and are the result of consultation and agreement with the cryptocurrency industry, the ARB said.

It is also an attempt from the crypto industry to self-regulate issues before being forced to do so by the government.

According to Gail Schimmel, CEO of the ARB, the move will undoubtedly result in better protection for vulnerable consumers.

Marius Reitz, GM for Africa at Luno said that rules around ethical advertising are non-negotiable for the crypto industry.

“We don’t want rogue advertisers making claims that mislead vulnerable consumers about the reality of crypto investment. It is important to us that consumers enter this market with their eyes open and their expectations realistic.”

The new clause is clause 17 of Section III, and the full text follows:

  • 17.1 Advertisements must expressly and clearly state that investing in crypto assets may result in the loss of capital as the value is variable and can go up as well as down.
    • The wording should be, or should communicate the same, as the following example:
      • Investing in crypto assets may result in the loss of capital.
  • 17.2 Advertisements must comply with Clauses 2 and 4.2.1 of Section II In particular:
    • 17.2.1. The overall message of the advertisement must not contradict the warning statements set out in Clause 17.1 above.
    • 17.2.2. An advertisement for a particular crypto asset service or product must explain the relevant product or service in a way that is easily understandable for the intended target audience.
    • 17.2.3 Advertisements must give a balanced message about the returns, features, benefits and risks associated with the product or service.
    • 17.2.4 Rates of return, projections and forecasts must be supported by adequate substantiation that complies with the requirements of Clause 4.1 of Section II. It must be communicated how any rate of return, projection or forecast is calculated and what significant conditions apply.
    • 17.2.5 Information presented about past performance must make it clear that the past performance is not indicative of future performance. Any historical period or past performance should not be presented in such a way that it creates a favourable impression of the advertised product or service.
  • 17.3. Advertisements by crypto asset service providers who are not registered credit providers should not encourage the purchase of crypto assets on credit. This does not preclude advertisements providing information about the payment methods offered by crypto asset service providers.
  • 17.4. Where influencers or ambassadors are used to promote a crypto asset product or service, the requirements of Appendix K must be complied with. In particular, the influencer or ambassador may share factual information only. Influencers and ambassadors may not offer advice on trading or investing in crypto assets and may not promise benefits or returns.

The ARB is a self-regulatory body of the advert and public relations industry in South Africa, which has jurisdiction over companies and advertisers – whether they are members or not.

All advertising in the electronic broadcast media is subject to the Electronic Communications Act, 2005 (ECA), and every electronic broadcaster must adhere to the Code of Advertising Practice as determined and administered by the ARB. This was affirmed by the Supreme Court of Appeal in 2022.

South Africa has attained a worrying reputation for falling victim to massive crypto scams.

In 2020, Mirror Trading International’s (MTI) scheme was named the year’s biggest crypto investment scam. In 2021, the Africrypt scandal made waves as another massive red flag.

In October 2022, the Financial Sector Conduct Authority (FSCA) declared cryptocurrencies a financial asset in South Africa, opening a path to professionalize and regulate the crypto industry in the country.

It also opened the door to take on scammers – with the threat of prison time and millions of rands in fines hanging over their necks.

Read: Major crackdown on crypto scams in South Africa – with millions in fines and up to 10 years in prison

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