In October 2022, South Africa’s Financial Sector Conduct Authority (FSCA) declared crypto assets as financial products under the Financial Advisory and Intermediary Services (FAIS) Act.
Thereby, allowing FSCA and other regulators will to tackle crypto scams and also protect customers.
Per the declaration, Unathi Kamlana, the FSCA’S Commissioner defines a crypto asset as a digital representation of value that: is not issued by a central bank, but is capable of being traded, transferred or stored electronically by natural and legal persons for the purpose of payment, investment and other forms of utility; applies cryptographic techniques; and/or uses distributed ledger technology.
On Monday (Jan. 24, 2023), the Advertising Regulatory Board (ARB) announced that it is adding a new clause to the Code of Advertising Practice that deals with cryptocurrency products. The ARB is also seeking to tighten the rules for social media influencers who promote crypto.
“Rules around ethical advertising are non-negotiable for us as an industry. We don’t want rogue advertisers making claims that mislead vulnerable consumers about the reality of crypto investment,” Marius Reitz, Africa Manager at Luno, a South Africa-based crypto exchange, said. ARB updated these regulations after consultations with critical stakeholders, including Luno.
Inside the updated ARB Code of Advertising Practice
“It is important to us that consumers enter this exciting market with their eyes open and their expectations realistic,” Reitz added.
The new clause was added to section III of the advertising code.
Find excerpts below:
- Advertisements must expressly and clearly state that investing in crypto assets may result in the loss of capital as the value is variable and can go up as well as down. The wording should be, or should communicate the same, as the following example: “Investing in crypto assets may result in the loss of capital.”
- The overall message of the advertisement must not contradict the warning statement above.
- An ad for a particular crypto asset service or product must explain the relevant product or service in a way that is easily understandable for the intended target audience.
- Ads must give a balanced message about the returns, features, benefits and risks associated with the product or service.
- Rates of return, projections and forecasts must be supported by adequate substantiation. It must be communicated how any rate of return, projection or forecast is calculated and what significant conditions apply.
- Information presented about past performance must make it clear that past performance is not indicative of future performance. Any historical period or past performance should not be presented in such a way that it creates a favourable impression of the advertised product or service.
- Ads by crypto asset service providers that are not registered credit providers should not encourage the purchase of crypto assets on credit. This does not prevent ads from providing information about the payment methods offered by crypto asset service providers.
- Where influencers or ambassadors are used to promote a crypto asset product or service, they may share factual information only. Influencers and ambassadors may not offer advice on trading or investing in crypto assets and may not promise benefits or returns.
