SA reins in Crypto Ads to combat investment scams

The South African Advertising Regulatory Board (ARB) has added a new clause to its Code of Advertising Practice to regulate the information that crypto advertisers pass to consumers. The move was led by crypto exchange Luno, and is aimed at protecting consumers from being misled by unethical advertisers. The new code of advertising practice includes several requirements for crypto-related advertisements.

Advertisers must clearly state that “Investing in crypto assets may result in the loss of capital,” as cryptocurrencies are known to be volatile. The overall message of the ad should not downplay the possibility of losing funds to crypto, and advertisements for a particular product must explain its offerings clearly to its target audience.

Furthermore, advertisements must be balanced, with risks stated as clearly as benefits. Rates, returns, and forecasts by the advertisers must be supported by adequate substantiation, and it should be clear that the favorable performance of the crypto market in the past is not indicative of future performances. When using influencers to promote a crypto asset or product, every piece of information they give should be factual, and offering advice to consumers is not permitted.

This new code of advertising practice comes in the wake of a number of high-profile crypto scams in South Africa. In June 2022, The Commodity Futures Trading Commission (CFTC) charged Cornelius Johannes Steynberg, a South African from Stellenbosch, Western Cape for perpetrating a $1.7 billion bitcoin fraud. Steynberg created and operated an entity known as Mirror Trading International (MTI), which was advertised to consumers as a way to build wealth through bitcoin. Another popular crypto scam was a $3.6 billion heist by brothers Ameer Cajee and Raees Cajee, the founders of the crypto investment app Africrypt.

The ARB’s new code of advertising practice could help steer South Africans away from suspicious crypto entities, but it remains to be seen if it will effectively curb crypto scams in the country. Consumers are advised to exercise caution and to thoroughly research any crypto investment opportunity before committing funds.