UK watchdog slams Crypto.com for misleading ad
The UK Advertising Standards Authority (ASA) continues its onslaught against misleading cryptocurrency advertising. Following last month’s rulings against eToro and Coinbase, as well as Arsenal Football Club, the ASA today issued a ruling against Crypto.com, a payment and cryptocurrency trading platform.
The ruling concerns two in-app ads for Crypto.com:
- a. The first ad, seen on 1 September 2021 in the Daily Mail app, included text which stated “Buy Bitcoin with credit card instantly.”
- b. The second ad, seen on 30 July 2021 in the Love Balls app, included text which stated “Earn up to 3.5% p.a”. The number in the text increased to “8.5%”.
The ASA challenged whether:
- ads (a) and (b) were misleading because they failed to illustrate the risk of the investment;
- ads (a) and (b), were irresponsible and took advantage of consumers’ inexperience or credulity;
- ad (a) was misleading because it failed to make clear limitations to purchasing cryptocurrency with a credit card;
- the claim “Earn up to 8.5%” in ad (b) was misleading because the basis for calculating the earning forecast had not been made clear; and
- the claim “Earn up to 8.5%” in ad (b) was misleading and could be substantiated.
The CAP Code required that marketing communications for investments made clear that the value of investments was variable and, unless guaranteed, could go down as well as up. It also required that significant limitations and qualifications were stated and presented clearly.
The ASA noted the ads were shown in apps which the body considered were likely to have a general audience who were unlikely to have any specialist knowledge of investing in cryptocurrency. The ASA considered such an audience would expect cryptocurrency investments to be regulated, with legal protection in place for investment activities.
The watchdog understood that cryptocurrencies in general were not regulated within the UK, and therefore consumers could not seek recourse to services such as the Financial Services Compensation Scheme or the Financial Ombudsman Service. The fact that cryptocurrency was unregulated the ASA considered to be material information that consumers required in order to make informed decisions about Crypto.com’s service, and should have been made clear in the ad.
Therefore because neither the ads (a) and (b), nor the landing pages from them, included 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 ASA concluded that the ads were misleading.
Further, the ASA considered that the general public were unlikely to be aware that Capital Gains Tax (CGT) could be paid on cryptocurrency profits once annual tax free allowances were exhausted. Neither ad made reference to tax. The ads did not link through to the website and there was no such information either, on the landing pages to where the ads linked. In addition while the website did contain details about the potential need to pay CGT on cryptocurrency gains, it was only found by accessing a link at the bottom of the Crypto.com home page.
Ad (a) stated “Buy Bitcoin with credit card instantly”, and the ASA therefore considered it encouraged consumers to buy cryptocurrency on credit. The watchdog considered that for those consumers without cash or savings, the ad therefore encouraged buying cryptocurrency by taking out debt they would be unable to repay if there was no return on their investment.
Also, the ASA understood cryptocurrency was highly volatile and could lead to large losses. Given the volatile nature of cryptocurrencies, the ASA considered the potential amount of credit card debt could be significantly more than the subsequent value of the investment. It considered that, even where consumers held cash or savings, there was a risk that if the investment did not perform well, they could be unable to pay off their credit card.
For those reasons, the ASA concluded that the ad took advantage of consumers’ inexperience and credulity by not making clear tax could be paid on cryptocurrency profits and by irresponsibly encouraging investing in cryptocurrency on a credit card.
The CAP Code stated that marketing communications must not mislead the consumer by omitting material information. Where a marketing communication was constrained by time or space, the measures that the marketer took to make that information available to the consumer by other means were relevant when considering whether it was misleading.
Ad (a) stated “Buy Bitcoin with credit card instantly”, which the ASA considered encouraged consumers to purchase cryptocurrency with a credit card. The ASA understood that purchases of cryptocurrencies on a credit card could be subject to a higher cash interest rate, and if considered a cash advance, a cash advance fee would have been due, which could be noted on a credit file and affect future borrowing. In addition some credit card issuers did not allow users to buy cryptocurrency.
The ASA considered that information was likely to be material to consumers to be made aware of, and there was nothing in the ad, or the appstore page to which the ad linked, that made this information clear. The watcdog therefore concluded that the ad was misleading.
The body understood that consumers would interpret the claim “Earn up to 3.5% p.a.” which increased to “Earn up to 8.5% p.a.” to mean that any deposit could increase by the highest amount shown.
The ASA considered the ad did not make clear that the claim “Earn up to 3.5% p.a.”, which increased to “Earn up to 8.5% p.a.”, referred to a return on cryptocurrency or that the rate depended on the type of cryptocurrency, the amount transferred or the period held with Crypto.com. That notwithstanding, the watchdog had also not seen any evidence to substantiate that 8.5% per year would be paid.
Therefore, because the basis used to calculate the figure was not clear and because Crypto.com had not substantiated the reward rate, the ASA concluded the ad was misleading.
The ad must not appear again in the form complained about. The ASA told Forisgfs UK Ltd t/a Crypto.com 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 was unregulated.
In addition, the ASA told Crypto.com to ensure that their future marketing communications did not irresponsibly take advantage of consumers’ lack of experience or credulity by irresponsibly encouraging investing in cryptocurrency using a credit card, and by not making clear that CGT was not due in some circumstances on cryptocurrency profits.
The ASA told Crypto.com that future ads must make clear that the purchase of cryptocurrency using a credit card could be subject to higher interest rates, extra fees and that some credit card issuers prohibit the buying of cryptocurrency.
Finally, the ASA instructed Crypto.com to ensure that the basis of any projection in their ads was made clear and that they held adequate substantiation to support their claims.