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:
Three issues were investigated, all of which were Upheld.
Ad description
An in-app ad for Luno, a cryptocurrency exchange service, seen within the Daily Mail Online app on 14 August 2021, included text which stated “Invest in crypto for as little as £1”.
Issue
The ASA challenged whether the ad was misleading because:
1. it failed to illustrate the risk of the investment; and
2. it did not make clear that fees for buying and selling were applicable.
3. The ASA also challenged whether the ad was irresponsible because it took advantage of consumers’ inexperience or credulity.
Response
1. Luno Money Ltd t/a Luno acknowledged that all of their ads should have included a warning explaining that cryptocurrency could go down as well as up and was unregulated. However, they said in this case a third-party advertising agency had not included that information for some of their ads. They explained that they had taken steps to ensure that the third-party advertising agency understood the need to use the warning and would implement it in the future.
2. Luno said that the ad was constrained by space and so a meaningful explanation of Luno’s fees, relating to the various methods of buying cryptocurrency, was not possible in the ad. They stated that any consumer who wanted to buy cryptocurrency had to agree to their Terms of Use and confirm the purchase price. At both stages they would have been presented with information, multiple times, about fees for buying or selling. They said that because the ad was limited by space, and general in content, they believed the information on the website was reasonable to make consumers aware of the fees.
3. Luno explained that the ad had been intended to make consumers aware that investing in cryptocurrency need not be expensive. They understood that some individuals could invest more than they could afford. The ad highlighted how it was possible to trade in cryptocurrency for relatively low amounts and therefore had projected the message that consumers should never invest more than they could afford to lose.
Luno stated that the inclusion of tax obligations in the ad would have been impractical and confusing. They explained that while tax could be due on the sale of cryptocurrency, the majority of customers would purchase cryptocurrency and then hold it. Therefore the need to include tax implications in the ad, especially one that promoted the purchase and not the sale of cryptocurrency, was not relevant and would need a level of detail in the ad that could confuse customers.
Luno said that they were not aware of any ads for financial products providing information on tax implications.
Associated Newspapers Ltd said that the ad space had been sold by programmatic automatic transmission and they had not received any complaints about the ad.
Assessment
1. 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 understood that cryptocurrency was a volatile investment, subject to frequent change and one that could potentially lead to large losses.
The ASA noted Luno’s response that the lack of qualification was an error made by a third party and they had taken steps to include the relevant information in the future. Nevertheless 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 and 3.3 (Misleading advertising), 3.9 (Qualification) and 14.4 (Financial products).
2. Upheld
The CAP Code stated that marketing communications must not mislead the consumer by omitting material information. Material information was information that the consumer needed to make informed decisions in relation to a product. We understood that buying and selling fees would be material information to consumers, especially in the context of an ad that focused on purchasing cryptocurrency and doing so at a low price.
We acknowledged that where an ad was constrained by time or space, the measures that the marketer took to make that information available to the consumer by other means were relevant when considering whether it was misleading. We understood the ad linked through to the Luno website. We did not consider that the ad was constrained by space in the way described by Luno. Nevertheless, while consumers would have seen information about buying and selling fees at a later stage in the purchase journey by way of the Terms of Use and when confirming the purchase price, neither the ad nor the landing page on the Luno website had contained a qualification with information about buying and selling fees.
Because neither the ad, nor the landing page, immediately included information about fees relating to buying and selling, we therefore concluded that the ad was misleading.
On that point the ad breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising) and 3.9 (Qualification).
3. Upheld
We noted Luno’s response that the ad was intended to highlight that cryptocurrency was affordable and that they hoped that message would prevent individuals investing more than they should. We understood cryptocurrency investment was sophisticated and complex, subject to frequent change in value and one that could potentially lead to large losses. Therefore, in the absence of any information to the contrary, we considered that the focus of the ad on low cost investments would lead consumers to understand the ad to mean cryptocurrency was a straightforward matter, accessible at low cost to all users regardless of their understanding of the product or personal circumstances.
We considered that the general public were unlikely to be aware that Capital Gains Tax (CGT) had to be paid on profits from investing in cryptocurrency once allowances were exceeded. We acknowledged Luno’s comment that tax was only paid on the sale of cryptocurrency and not all their users were looking to sell. However, the information would have been relevant to a significant proportion of those interested in purchasing and trading cryptocurrencies. The ad did not contain any information that CGT could be payable on profits from investing in cryptocurrency. We, therefore, considered that the potential tax implications were not made sufficiently clear to consumers considering investing in it.
Because we considered that the ad took advantage of consumers’ inexperience or credulity by suggesting that investing in cryptocurrency was simple and by not making clear that CGT could be payable on profits from investing we concluded the ad 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).
Action
The ad must not appear again in the form complained about. We told Luno Money Ltd t/a Luno 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; that cryptocurrency was unregulated; and that buying and selling fees were applicable. We also 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, and by not making clear tax could be due on cryptocurrency.
