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
A digital poster for Ziglu, an online cryptocurrency platform, seen in September 2021. The ad had headline text that stated “Scotland, your capital is at risk” in large print. Underneath this was text that stated, “ziglu.io/capital” within an image of an online search bar. Small print at the bottom of the ad stated, “As with any investment, your capital is at risk. As Ziglu is not a bank, investments are not covered by the Financial Compensation Scheme. Ziglu Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 (Firm Reference No.900977).”
Issue
1. The complainant challenged whether the ad caused unjustifiable distress because it implied that the capital of all Scottish consumers’ was at risk.
The ASA challenged whether the ad was:
2. misleading because it did not make clear it was referring to cryptocurrency; and
3. was irresponsible because it took advantage of consumers’ inexperience or credulity.
Response
1. Ziglu Ltd t/a Ziglu said that the ad was part of a short, geographically limited, one-off advertising campaign which was designed to highlight the risks of financial investments. They confirmed they would not be running the campaign again or one that was similar.
They said that on 24 August 2021 they launched a new advertising campaign in Edinburgh with the slogan “Scotland, your capital is at risk” to coincide with the Edinburgh festival. The ad appeared in 200 outdoor locations in Edinburgh until 5th September 2021. They explained they picked Edinburgh because it was the Scottish capital and a growing number of Scottish people were buying cryptocurrency. They explained that as cryptocurrency became more mainstream it was socially responsible to highlight the risks associated with the product and other mainstream investments. They said that not all consumers appreciated that capital was at risk with those types of investments and they therefore believed the message in the ad was a responsible one.
They said that there was no intent with the ad to imply that only Scottish consumers’ capital was at risk or that it applied to all Scottish consumers. The message of the ad was intended to explain that Scottish consumers, amongst others, who invested in financial products, were at risk. They explained that the claim “Capital is at risk” was a well-established risk warning in the financial industry and was required by the Financial Conduct Authority (FCA) when promoting certain financial products or services.
They said the intent of the ad was to make consumers really think about and reflect on what “your capital is at risk” meant. In conjunction with the advertising campaign, they launched a page on their website which highlighted FCA guidance to financial institutions regarding investing and how they should provide a risk warning.
They said they regretted causing any distress with the ad. However, they said that a single complaint had been made and that should be viewed against the total number of consumers who saw the ad. They said that they did not believe a prominent “capital at risk” warning would cause distress but acknowledged that distress had been caused in that instance.
They said the message in the ad was not shocking, but distressing approaches could be justified to raise awareness of a social problem.
JCDecaux said the language used in the ad was standard wording and as such they did not believe it would cause fear and distress. They said the aim of the ad was to seek attention or invite further enquiry.
2. Ziglu said they provided a range of services, including, but not limited to, cryptocurrency. They explained the ad had not advertised an investment in cryptocurrency, but promoted the Ziglu brand and provided a prominent risk warning about investments in general, and therefore generated a conversation about the ad’s message. They said the ad was not encouraging consumers to engage in the products or services provided by Ziglu. Therefore, as the ad did not concern a particular product, no further information was needed in the ad.
JCDecaux said the ad was not for cryptocurrency. They explained the ad did not state what goods and services were offered and for that reason it was misleading. They understood Ziglu offered a range of financial services, one of which was cryptocurrency. They said the language in the ad was non-specific and did not allude to income generating investments, other than the word “capital” which was used with humour. They apologised for the ad and said that they should have undertaken a more vigorous analysis of the ad’s text.
3. Ziglu said that the ad had not promoted or offered any cryptocurrency or wider financial product. The ad had only been intended to trigger debate by using a prominent risk warning. Since the ad was not about cryptocurrency there was no obligation to provide information about tax.
JCDecaux said that while the ad was unclear they did not believe it took advantage of consumer inexperience or credulity.
Assessment
1.Upheld
The headline claim in the ad was “Scotland, your capital is at risk”. With the exception of the small print, that said that capital was at risk with any investment, the ad gave no other explanation or context to the headline claim and did not explain that the ad was promoting cryptocurrency. The ASA therefore considered that consumers would interpret the claim “Scotland, your capital is at risk” to mean that the capital of all Scottish residents was at risk to the same degree, regardless of how that capital was held. In doing so encouraged consumers to respond to that warning by visiting the webpage ziglu.io/capital, which was a page of their website dedicated to promoting investment in their cryptocurrency services.
We considered the claim’s suggestion that all Scottish consumers’ capital was currently at risk was one that was likely to shock and cause distress, particularly because the ad gave no explanation or indication why that was the case or explanation that different asset classes were subject to varying degrees of risk. Given that the intention of the ad was to promote cryptocurrency, which unlike many other forms of asset classes, was entirely unregulated and unprotected, we understood that the capital of all Scottish residents was not at risk in the way the ad implied.
While we considered highlighting risk in relation to financial products was important, in the context of promoting the advertiser’s cryptocurrency service, we considered that causing distress by suggesting all Scottish consumers’ capital was at risk and then including a weblink that encouraged investment in cryptocurrency as a suitable way of mitigating that risk, when that was not the case, was not justified.
For those reasons, we considered that the ad was likely to cause unjustifiable distress and concluded that it breached the Code.
On that point, the ad breached CAP Code (Edition 12) rule 4.2 4.2 Marketing communications must not cause fear or distress without justifiable reason; if it can be justified, the fear or distress should not be excessive. Marketers must not use a shocking claim or image merely to attract attention. (Harm and offence)
2. Upheld
We noted the headline claim “Scotland, your capital is at risk” appeared next to an image of an internet search tool with the term ziglu.io/capital entered into it. In the small print the ad stated that “As with any investment, your capital is at risk. As Ziglu is not a bank, investments are not covered by the Financial Compensation Scheme”. We therefore understood that the ad was referring to an investment and one that was not protected by any financial compensation scheme, but gave no further explanation as to the nature of that investment.
We acknowledged that Ziglu provided a number of financial services including cryptocurrency services and foreign currency debit cards, but the only products they offered that were not regulated by the FCA were their cryptocurrency services. We further noted that the link ziglu.io/capital led to a page on the Ziglu website that specifically promoted their cryptocurrency services and related Bitcoin Boost and Sterling Boost accounts which were themselves a means to invest in bitcoin and stablecoin services.
However, the ad itself gave no further indication that the investment being promoted was for cryptocurrency services. We understood that cryptocurrencies and other forms of cryptoassets were complex and high-risk investments. The risks of investing in them were not well understood by the general public and as such would not be suitable for many consumers.
We therefore considered the fact that the ad was promoting cryptocurrency services, was material information that consumers needed in order to be able to make an informed decision in relation to engaging further with the product being advertised. Therefore, because the ad did not make it clear it was promoting cryptocurrency services, we concluded that the ad was misleading.
On that point, the ad breached CAP Code (Edition 12) rules
3.1
3.1
Marketing communications must not materially mislead or be likely to do so.
and
3.3
3.3
Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that the consumer needs to make informed decisions in relation to a product. Whether the omission or presentation of material information is likely to mislead the consumer depends on the context, the medium and, if the medium of the marketing communication is constrained by time or space, the measures that the marketer takes to make that information available to the consumer by other means.
(Misleading advertising) and
3.9
3.9
Marketing communications must state significant limitations and qualifications. Qualifications may clarify but must not contradict the claims that they qualify.
(Qualification).
3. Upheld
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. The ad was for cryptocurrency and did not contain any information that CGT could be payable on profits from investing in cryptocurrency, and so we considered the potential tax implications was not made sufficiently clear to consumers considering investing in it.
Because 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 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 its current form. We told Ziglu Ltd t/a Ziglu to ensure that their future ads did not cause unjustifiable distress. We also told them to ensure they made sufficiently clear that the product advertised was cryptocurrency. We further told them to ensure that they did not irresponsibly take advantage of consumers’ lack of experience or credulity by not making clear tax could be due on cryptocurrency.
