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:
Four issues were investigated, all of which were Upheld.
Ad description
A paid-for Facebook ad for Coinbase, a cryptocurrency exchange platform, seen on 27 July 2021, included text which stated “£5 in #Bitcoin in 2010 would be worth over £100,000 in January 2021. Don’t miss out on the next decade – get started on Coinbase today”. Under the heading “coinbase”, a list of bullet points included text which stated “Simple and easy to use”, “Never been hacked” and “Trusted”. Under the heading “The Competition”, a list of bullet points included text which stated “Unregulated”. At the bottom of the post, text stated “Buy bitcoin in 5 minutes with as little as £25”.
Issue
The ASA challenged whether:
1. the ad was misleading because it failed to illustrate the risk of the investment;
2. the ad was irresponsible because it took advantage of consumers’ inexperience or credulity;
3. the claim that Coinbase’s competition was “unregulated” was misleading because it implied Coinbase were regulated for cryptocurrency services; and
4. the claim “£5 in #Bitcoin in 2010 would be worth over £100,000 in January 2021. Don’t miss out on the next decade – get started on Coinbase today” was misleading because it implied there would be a similar guaranteed, increase in Bitcoin value over the next decade and did not make clear that past performance was not necessarily a guide for the future.
Response
1. Coinbase Europe Ltd t/a Coinbase said that the ad did not state or imply that cryptocurrencies were an investment. Further to that, consumers were made aware of the relevant risks through their user agreement and had the opportunity to discover more through the “Learn” pages on their website and through their “Earn” product. They explained that through those resources they made clear that cryptocurrencies were a high risk product.
They confirmed that their standard risk disclaimer for ads did state investing in cryptocurrency was high risk. While the ad in question was no longer live, they said if they chose to run it again, or any similar ad, they would include the disclaimer.
2. Coinbase stated that the claim “Simple and easy to use” did not refer to cryptocurrency as a whole being easy to use but referred to their app, which had been designed to be intuitive, easy and safe for all users. Regarding the claim “buy bitcoin in 5 minutes with as little as £25” they said that this was factually true.
They confirmed they made no reference to the tax implications of cryptocurrency because to do so would constitute advice, which they did not provide. However, their user agreement made clear that consumers were obliged to determine if tax was due and pay it to the relevant tax authorities.
Coinbase stated that the ad did not take advantage of consumers’ inexperience or credulity but instead encouraged consumers to consider the reputation and nature of the cryptocurrency exchanges they were using. As a company they placed high importance on educating users about cryptocurrency, including their “Earn and Learn” programme that paid small amounts of cryptocurrency when online activities were completed.
3. Coinbase explained that Coinbase users in the UK were given services from two entities. CB Payments, regulated by the Financial Conduct Authority (FCA), provided E-money services and Coinbase Europe Ltd provided crypto services. In addition to that Coinbase held numerous licences across its global business including money transmitter licences in 49 US states. On that basis, the claim that their competitors were “unregulated” was used to highlight that Coinbase were regulated to a higher degree than other cryptocurrency businesses.
4. Coinbase said that the ad did not imply that there would be a guaranteed increase of Bitcoin over the next decade. Instead the ad pointed out that it was an exciting time for cryptocurrencies and did not direct users to buy cryptocurrency.
Assessment
1. Upheld
The ASA noted Coinbase’s comments that the risks of cryptocurrency were made clear on their website and we acknowledged their intention to include a risk disclaimer in future ads. However, 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 understood that cryptocurrency was a volatile, unregulated investment, subject to frequent change and one that could potentially lead to large losses.
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).
2. Upheld
We noted Coinbase’s comment that there was no intent in the ad to imply that cryptocurrency as a whole was straight forward and that the claim “Simple and easy to use” referred specifically to their app which had been built to be user friendly and accessible. While Coinbase’s app might have been user friendly, cryptocurrency investment itself was sophisticated and complex. However, there was nothing in the ad to highlight this. In the absence of any other information to the contrary, we considered that consumers would interpret the ad to mean that investment in cryptocurrency in general on Coinbase’s platform was simple and open to those with limited knowledge of the sector. That was compounded by the use of the claim “Buy Bitcoin in 5 minutes with as little as £25”.
We acknowledged that Coinbase had included information on their website about tax and they did not wish to offer advice in the ad. We understood that the general public would be unlikely to be aware that Capital Gains Tax (CGT) could be paid on cryptocurrency profits in excess of any annual personal CGT allowance. 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 were not made sufficiently clear to consumers considering investing in cryptocurrency.
For those reasons, we concluded that the ad took advantage of consumers’ inexperience and credulity by not making clear tax could be paid on cryptocurrency profits and irresponsibly suggested that investing in cryptocurrency was straightforward and for everyone regardless of personal financial circumstances or understanding of the product.
On that point the ad breached CAP Code (Edition 12) rules 1.3 (Social responsibility), and 14.1 (Financial products).
3. Upheld
We noted that the ad used the claim “unregulated” under the heading “The Competition” and because the ad contrasted Coinbase with “The Competition”, we considered that consumers would understand from the ad that Coinbase was regulated. We acknowledged Coinbase’s explanation that they held numerous licences including being regulated by the FCA. However, we noted that while a company could be regulated by the FCA, cryptocurrency services in general were not. We considered that consumers would assume that regulation, in the context of an ad for a cryptocurrency product, would mean that the company and the specific cryptocurrency services they advertised were regulated by the FCA. Because that was not the case 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).
4. Upheld
The CAP Code stated marketing communications should make clear that past performance or experience did not necessarily give a guide for the future; if they were used in marketing communications, examples of past performance or experience should not be unrepresentative. In addition marketing communications must not materially mislead or be likely to do so.
We noted that the claim “£5 in #Bitcoin in 2010 would be worth over £100,000 in January 2021. Don’t miss out on the next decade – get started on Coinbase today” used the past performance of Bitcoin to encourage consumers to use the Coinbase service, but it had not made clear that the example was not necessarily a guide for the future. In addition, we considered that consumers would understand from the use of the example, followed by the claim “Don’t miss out on the next decade …”, in the absence of any information to say it was not representative, to mean that there was a guaranteed return on consumers’ investment with a similar appreciation.
For these reasons, because the ad did not make clear that past performance or experience did not necessarily give a guide for the future and implied a guaranteed income, 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 14.5 (Financial products).
Action
The ad must not appear again in the form complained about. We told Coinbase Europe Ltd t/a Coinbase 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 and Coinbase Europe Ltd t/a Coinbase, for the purposes of cryptocurrency, was unregulated. We 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 regardless of personal circumstances or understanding of the product and by not making clear tax could be due on cryptocurrency profits. We also told them to make clear that examples of past performance or experience were not necessarily a guide to the future and that they should not state or imply a similar return in the future was guaranteed if that was not possible.
CAP Code (Edition 12)
1.3 3.1 3.3 14.1 14.4 14.5 3.9
