UK advertising watchdog slams Coinbase for misleading ad
The UK Advertising Standards Authority (ASA) today issued a ruling against a paid-for Facebook ad for cryptocurrency exchange platform Coinbase. Four issues were investigated, all of which were upheld.
A paid-for Facebook ad for Coinbase, a cryptocurrency exchange platform, seen on 27 July 2021, included text which stated “£5 in #Bitcoin in 2010 would be worth over £100,000 in January 2021. Don’t miss out on the next decade – get started on Coinbase today”.
Under the heading “coinbase”, a list of bullet points included text which stated “Simple and easy to use”, “Never been hacked” and “Trusted”. Under the heading “The Competition”, a list of bullet points included text which stated “Unregulated”. At the bottom of the post, text stated “Buy bitcoin in 5 minutes with as little as £25”.
The ASA challenged whether:
- the ad was misleading because it failed to illustrate the risk of the investment;
- the ad was irresponsible because it took advantage of consumers’ inexperience or credulity;
- the claim that Coinbase’s competition was “unregulated” was misleading because it implied Coinbase were regulated for cryptocurrency services; and
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the claim “£5 in #Bitcoin in 2010 would be worth over £100,000 in January 2021. Don’t miss out on the next decade – get started on Coinbase today” was misleading because it implied there would be a similar guaranteed, increase in Bitcoin value over the next decade and did not make clear that past performance was not necessarily a guide for the future.
The ASA notes that the CAP Code requires that marketing communications for investments make 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. ASA understood that cryptocurrency was a volatile, unregulated investment, subject to frequent change and one that could potentially lead to large losses.
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 the body concluded that the ad was misleading.
On that point the ad breached CAP Code (Edition 12) rules 3.1 3.3 (Misleading advertising), 3.9 (Qualification) and 14.4 (Financial products).
While Coinbase’s app might have been user friendly, cryptocurrency investment itself was sophisticated and complex, ASA warns. There was nothing in the ad to highlight this. In the absence of any other information to the contrary, ASA considered that consumers would interpret the ad to mean that investment in cryptocurrency in general on Coinbase’s platform was simple and open to those with limited knowledge of the sector. That was compounded by the use of the claim “Buy Bitcoin in 5 minutes with as little as £25”.
Furthermore, the ad did not contain any information that Capital Gains Tax (CGT) could be payable on profits from investing in cryptocurrency, and ASA considered the potential tax implications were not made sufficiently clear to consumers considering investing in cryptocurrency.
For those reasons, ASA concluded that the ad took advantage of consumers’ inexperience and credulity by not making clear tax could be paid on cryptocurrency profits and irresponsibly suggested that investing in cryptocurrency was straightforward and for everyone regardless of personal financial circumstances or understanding of the product.
On that point the ad breached CAP Code (Edition 12) rules 1.3 (Social responsibility), and 14.1 (Financial products).
Also, while a company could be regulated by the FCA, cryptocurrency services in general were not. ASA considered that consumers would assume that regulation, in the context of an ad for a cryptocurrency product, would mean that the company and the specific cryptocurrency services they advertised were regulated by the FCA. Because that was not the case ASA concluded that the ad was misleading.
On that point the ad breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising).
The CAP Code stated marketing communications should make clear that past performance or experience did not necessarily give a guide for the future; if they were used in marketing communications, examples of past performance or experience should not be unrepresentative. In addition marketing communications must not materially mislead or be likely to do so.
ASA noted that the claim “£5 in #Bitcoin in 2010 would be worth over £100,000 in January 2021. Don’t miss out on the next decade – get started on Coinbase today” used the past performance of Bitcoin to encourage consumers to use the Coinbase service, but it had not made clear that the example was not necessarily a guide for the future. In addition, ASA considered that consumers would understand from the use of the example, followed by the claim “Don’t miss out on the next decade …”, in the absence of any information to say it was not representative, to mean that there was a guaranteed return on consumers’ investment with a similar appreciation.
For these reasons, because the ad did not make clear that past performance or experience did not necessarily give a guide for the future and implied a guaranteed income, ASA 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 14.5 (Financial products).
ASA ruled that the ad must not appear again in the form complained about. The body told Coinbase Europe Ltd t/a Coinbase 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 and that cryptocurrency and Coinbase Europe Ltd t/a Coinbase, for the purposes of cryptocurrency, was unregulated.
Coinbase will have 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 regardless of personal circumstances or understanding of the product and by not making clear tax could be due on cryptocurrency profits.
ASA also told Coinbase to make clear that examples of past performance or experience were not necessarily a guide to the future and that they should not state or imply a similar return in the future was guaranteed if that was not possible.