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 poster for Floki Inu, a cryptocurrency, seen in November 2021 across the London Underground. The ad had an image of a cartoon dog wearing a Viking helmet. Text stated “MISSED DOGE. GET FLOKI”. Smaller text at the bottom of the ad said, “Your investment may go down as well as up in value. Crypto currency is not regulated in the UK”.
Issue
The ASA challenged whether the ad was irresponsible because:
1. the use of an image of a cartoon dog wearing a Viking helmet and the claim “Missed Doge. Get Floki”, exploited consumers' fears of missing out and trivialised investment in cryptocurrency; and
2. it took advantage of consumers’ inexperience or credulity.
Response
1. Floki Ltd t/a Floki Inu said it was a community owned cryptocurrency and an unregulated financial product available for investment on the cryptocurrency market since June 2021.
They explained that they had submitted the ad to the Committee of Advertising Practice (CAP) before launching the campaign and they were told that the ad complied with the CAP Code.
They said that the image of the cartoon dog was their corporate logo and was used in the ad as brand recognition. They explained it was also used on their website, social media platforms and cryptocurrency exchange websites. They believed it was not socially irresponsible to display their own corporate logo and it did not in itself trivialise investment in cryptocurrency. Further to this, to not include the logo would have been irresponsible as consumers would not have been able to identify the source of the marketing communication.
They stated their corporate logo was based on Elon Musk’s dog Floki. They said it was not unusual for cryptocurrencies to originate from humour and/or memes and it was unclear how this could trivialise cryptocurrency.
They said the intended audience of the ad was the “Informed Consumer”. The “Informed Consumer” had knowledge of the cryptocurrency market and how it worked, either through research or personal interest, and made an informed decision whether or not to invest. These individuals would understand the term “Doge” in the ad to refer to the cryptocurrency “Dogecoin” the logo for which was a Shiba Inu cartoon dog. In addition they would have understood the connection with Dogecoin and Floki Inu being a new cryptocurrency, which was inspired by Elon Musk’s tweet that he was adopting a Shiba Inu dog named Floki. Similarly the phrase “Missed Doge, Get Floki” was aimed at the “Informed Consumer” and not the general consumer.
They said the ad invited the “Informed Consumer” to take note of a new cryptocurrency but also protected the “average consumer” with the appropriate risk warnings concerning cryptocurrency. In addition the “average consumer” would see the ad as a play on words, but would not understand the ad without further research.
They said the ad did not idealise investment in cryptocurrency and it did not create a sense of urgency for the average consumer to invest immediately. The risk warning in the ad, which they believed had been appropriate and clear, had explained cryptocurrency was unregulated and that investments could go down as well as up. This prevented the “average consumer” from rushing to invest by informing them of the risks before going on the Floki Inu website. They understood therefore the ad did not suggest buying cryptocurrency was easy or straightforward.
They stated the ad was general in terms of advertising their brand and place on the cryptocurrency market. They said by not using financial language or detailed financial information in the ad - for example not having the value of the cryptocurrency or the word “invest” - they had been responsible by not giving the impression that the product was a regulated financial product.
They noted the concerns around cryptocurrencies, especially the view that they provided a thrill of getting rich quickly and the promise of high returns. They explained that while their campaign did not do this, or trivialise investment in cryptocurrency, their website did show that they invested in educating the community about cryptocurrency investment and were making it accessible to all those who were interested in investing.
2. They said they consulted with CAP about the content of the risk warnings needed in their ads. They explained that they were not informed that it was a requirement to include information about the implications of Capital Gains Tax (CGT) on cryptocurrency investments. They said had they known about that they would have included it. Further to this they could not find any information in the CAP Code or ASA guidance where it stated this information was needed in ads for cryptocurrency or wider financial products.
They said the ad did not include any monetary values of cryptocurrency and so it was unclear why they should have advised consumers about CGT when the ad didn’t display any such values. They had also conducted research into ads for share trading platforms and found no reference to CGT. They believed CGT should only be mentioned in ads for cryptocurrencies if they were in ads for all other investments.
They said the ad alone could not be seen to take advantage of consumer’s credulity as consumers did not make a decision to invest based solely on an ad. They explained that in addition to the risk warning in the ad, the Floki Inu website had information about cryptocurrency, including their whitepaper, that a consumer would see before purchasing. In addition the website had rigorous checks to ensure security and identification of the purchasers.
They said they had done everything in their power to comply with the CAP Code and the ASA guidance at the time of the campaign. They said that while the ASA may choose to develop revised guidance and policies for cryptocurrency, to retrospectively apply this to ads created before these changes was unfair. Nevertheless, they would adhere to any future guidance and policies the ASA released for their future campaigns.
Assessment
1. Upheld
The ASA acknowledged Floki Inu’s comments that the ad was only aimed at the “Informed Consumer” and in contrast they believed the “average consumer” would not have comprehended the full meaning of the campaign. However, while consumers who did not have extensive knowledge of cryptocurrencies may not have understood all the references in the ad, cryptocurrency itself was a high profile and topical matter and the ads were addressed to a general audience on London transport poster sites. In addition, the qualifying text in the ad confirmed that it was referring to a cryptocurrency investment. Therefore, the ad would have been understood by consumers in general as promoting a cryptocurrency in direct comparison to another.
The ad stated “MISSED DOGE. GET FLOKI” and therefore would have been understood to mean that for consumers who had missed out on an earlier cryptocurrency, in this case Dogecoin, Floki was a brand new alternative. In addition by equating Floki with Dogecoin, a cryptocurrency introduced in 2013, but one that by May 2021 had surged in value, it implied to those with more detailed knowledge of cryptocurrencies, that Floki too would be likely to sharply rise in price in a short period of time. While the specifics of the ad might not have been fully comprehended by those with limited or no knowledge of cryptocurrencies, the implication of the ad for all consumers was still that it was necessary to purchase Floki immediately to make a significant profit and prevent consumers missing out.
We noted that Floki Inu believed the small print in the ad would have prevented consumers from rushing into an investment by informing them of the risks of cryptocurrency. However, while the text did state investments could go down as well as up and cryptocurrencies were unregulated, the relative size of the text in relation to the headline claim “MISSED DOGE. GET FLOKI” was small, and therefore despite the qualifying text, the overriding impression of the ad was the pressing need to buy Floki, to prevent consumers losing out in the same way they could have done with Dogecoin.
We acknowledged that the image of a cartoon dog wearing a Viking helmet was Floki Inu’s corporate logo and appreciated that some cryptocurrencies had their origins in humour and memes. We considered that such imagery in and of itself would not necessarily trivialise investments. Nevertheless, in the context of an ad that was promoting cryptocurrency, especially one that was presented specifically to play on consumer’s concerns of not missing out on the next cryptocurrency to sharply appreciate in value, we considered that the use of cartoon imagery gave the impression that purchasing cryptocurrency was a light-hearted and trivial matter. As such, it distracted consumers from the seriousness of an investment which was volatile and unregulated.
For those reasons, we concluded that the ad irresponsibly exploited consumer’s fear of missing out and trivialised investment in cryptocurrency.
On that point, the ad breached CAP Code (Edition 12) rules 1.3 1.3 Marketing communications must be prepared with a sense of responsibility to consumers and to society. (Social responsibility), and 14.1 14.1 Offers of financial products must be set out in a way that allows them to be understood easily by the audience being addressed. Marketers must ensure that they do not take advantage of consumers' inexperience or credulity. (Financial products).
2. Upheld
We acknowledged Floki Inu’s comments that traditional financial products did not include information about CGT and that their website had further information highlighting that all laws within the jurisdiction of the purchaser’s country should be followed. We considered however that cryptocurrency was a relatively new product and one that was currently not understood as fully as well-established investments. Therefore, the general public were unlikely to be aware that CGT had to be paid on profits in excess of the annual CGT allowance from investing in cryptocurrency, in the same way they would for more traditional investments. In addition, while Floki Inu’s website may have included further information and warnings directing consumers to abide by the laws of their country of residence, the ad itself did not contain any information that CGT could be payable on profits from investing in cryptocurrency.
For those reasons we considered that the ad took advantage of consumers’ inexperience or credulity by not making clear that CGT could be payable on profits from investing. We therefore concluded the ad was irresponsible and breached the Code.
On that point, the ad breached CAP Code (Edition 12) rules 1.3 1.3 Marketing communications must be prepared with a sense of responsibility to consumers and to society. (Social responsibility), and 14.1 14.1 Offers of financial products must be set out in a way that allows them to be understood easily by the audience being addressed. Marketers must ensure that they do not take advantage of consumers' inexperience or credulity. (Financial products).
Action
The ad must not appear again in the form complained about. We told Floki Ltd t/a Floki Inu to ensure that they did not irresponsibly exploit consumer’s fear of missing out and trivialise investment in cryptocurrency. We also told them to ensure that they did not irresponsibly take advantage of consumers’ lack of experience or credulity by not making clear CGT could be due on cryptocurrency profits.
