South Africa’s Advertising Regulatory Board (ARB) has declared that all cryptocurrency exchanges and agencies within the borders of the country to include risk warnings in all crypto advertisements.
Historically, crypto users have been enticed by trade signals that promise massive profits without providing extensive disclosure of substantial risks. This is an attempt to protect crypto users in South Africa.
Read Also: Central African Republic (CAR) creates a 15-member committee to draft crypto bill
To have a saner clime and prevent traders from rampaging losses, crypto ads in South Africa must warn prospective buyers about the risks attached to their investment. This initiative is a move by South Africa’s Advertising Regulatory Board (ARB) to tighten the rules to prevent social media influencers from flouting and hyping any cryptocurrency.
Chief Executive Officer of South Africa’s Advertising Regulatory Board (ARB), Gail Schimmel, explained in a statement,
“This is a wonderful example of an industry that sees the harm that could be done in its name and steps up to self-regulate the issues without being forced to do so by the government.” In the updated ARB guidance, crypto ads “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.”
Read Also: Nigeria to establish a regulatory framework for stablecoins and ICOs
In addition, Gail Schimmel said, “The new rules are aimed at protecting consumers from being misled by unethical advertisers and are the result of consultation and agreement with the cryptocurrency industry.” Luno— a world-leading cryptocurrency company— had initiated the regulation of the information from crypto advertisers to consumers. Commending the innovative nudge of the company, Gail said, “It’s good that people within the industry saw how easily harm could come to consumers and decided to do something about it.”
Read Also: Coinbase to lay off 950 members of its workforce
Details of South Africa’s Advertising Regulatory Board Updated guidance
In the updated guidance (ARB), advertisers are implored to reveal clearly that “investing in crypto assets may result in the loss of capital,” as cryptocurrencies are flagrantly volatile and unpredictable. The advertisements created for a peculiar crypto product must have an appropriate explanation of its offerings. Any obscurity must be avoided at all costs. According to the updated guidance, the ad’s overall message should not play down the possibility of losing funds to crypto.
Advertisements must let go of eccentricity—there should be an equal revelation of benefits and risks. The balance should be evident. Rates, returns, and forecasts by the advertisers must be supported by adequate substantiation.
This means that the calculations that resulted in the forecasts should be communicated clearly. It should be clear that the past performance of the crypto market is not indicative of its future performance. Finally, when using influencers to promote a crypto asset or product, every piece of information they give should be factual. Offering advice to consumers is not permitted.
Crypto Fraud Cases In South Africa
There have been different cases of cryptocurrency fraud in South Africa. One of the notable cases is the Mirror Trading International Propriety Limited (MTI) crypto fraud incident. The Commodity Futures Trading Commission filed civil charges against MTI last year for processing a dubious commodity pool valued at over $1.7 billion in bitcoin and over registration violations.
The South African company and its CEO, Cornelius Johannes Steynberg, had solicited bitcoin online from numerous people. The total amount raised by this group of people approached to donate bitcoin is a whopping $23,000.00. This gathering of bitcoins took place between May 2018 and March 2021.
The CFTC alleged that MTI had operated a scheme “to solicit, accept, and pool more than $1.7 billion to trade off-exchange, retail foreign currency (forex) on a leveraged, margined, and/or financed basis.”
It claimed that, rather than trading forex as MIT claimed, the company embezzled pool funds, misrepresented trading and performance, fabricated account statements, and used a bogus broker through whom the trading occurred.
To protect crypto users, the imposition of risk warnings in crypto ads by ARB is the right move.
Technext Newsletter
Get the best of Africa’s daily tech to your inbox – first thing every morning.
Join the community now!
