Crypto Ads are Regulated in South Africa

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South Africa has announced specific rules for crypto advertisements to protect investors, with advertisers being told they must disclose the risks associated with crypto.

During the peak of bull markets, crypto service providers aggressively promoted their offerings. They have used various means to promote their product like sponsorship of sporting events and brand endorsements from well-known celebrities and social media influencers.

According to TechCentral, South Africa’s Advertising Regulatory Board (ARB) has added a new crypto-related clause to the Advertising Code of Practice to provide better protection for investors.

South Africa Craft Rules for Crypto Ads

The new rules focus on improving consumer awareness by avoiding misleading data in advertisements. Crypto advertisements should also warn consumers about asset price fluctuations and loss of capital.

The updated Code of Advertising Practices also states that advertising explains the product offered in a manner “easily understood by the target market audience”. Basically, it insists that influencers can only share factual information and should not “offer advice” on trading or investing.

It should also be noted that Luno, a Cape Town-based crypto exchange, helped the ARB prepare the new rules. Marius Reitz, Managing Director of Luno Africa, says: “Ethical advertising rules are non-negotiable for us as an industry. We don’t want dishonest advertisers making claims that mislead vulnerable consumers about the reality of investing in crypto.

The fight against misleading advertising

Celebrities and social media influencers are under close scrutiny from regulators, especially after FTX collapsed last November. The UK Treasury is concerned about misleading crypto advertisements and will soon pass regulations to protect consumers.

Rishi Sunak, the Prime Minister of the United Kingdom, said: Crypto-assets can offer exciting new opportunities. It is important that consumers are not sold products with misleading advertisements.

In December, the United States Securities and Exchange Commission (SEC) targeted social media influencers for $100 million in securities fraud. The SEC alleged that social media influencers had been pretending to be successful traders since January 2020 and were using their followers on Twitter and Discord to manipulate stock prices.

Legal responsibilities of social media influencers

Celebrities who previously promoted FTX are now facing legal issues. An Oklahoma resident has filed a class action lawsuit against celebrities associated with FTX, including Tom Brady, Stephen Curry and Shark Tank personality Kevin OLeary. The lawsuit accuses these influencers of promoting unregistered titles and seeks $11 billion in damages.

Additionally, the Texas State Securities Board is investigating whether celebrity endorsements of FTX violated state securities laws.

Vitalik Buterin, the co-founder of Ethereum, shared his thoughts on whether influencers should be held legally responsible for promoting projects. He thinks it’s counterproductive because risk-averse influencers are more likely to keep quiet. However, it further clarifies that influencers should be required to disclose paid promotions.

Making influencers legally liable in a broad sense is likely to be counterproductive, as it would make risk-averse people (who might be the best at distinguishing genuine good stuff from junk) more likely to shut up.

Requiring disclosures for a paid promotion is reasonable.

— vitalik.eth (@VitalikButerin) November 19, 2022

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Disclaimer

BeInCrypto has reached out to a company or individual involved in the story for an official statement on recent developments, but has yet to receive a response.

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