Susannah Streeter, Senior Investment and Markets Analyst at Hargreaves Lansdown:
“Companies which flog crypto-assets as simple investments, without high risk warnings are coming under increasing scrutiny. The latest companies to be rapped over the knuckles by the advertising watchdog include eToro, Luno Money and Coinbase Europe.
“The trickle of complaints about coins and tokens is turning into a flood, with almost half of the complaints published today as being upheld related to the crypto trading.
“The trading platform eToro was among those censured, with the ASA upholding a complaint against the company for an advert for a crypto assets portfolio, which is promoted as an investment which could be made with ‘one click’. The watchdog ruled the ad was irresponsible because it took advantage of consumers’ inexperience and misleading, because it failed to illustrate the risks of the investment. It’s highly concerned about the overall impression the ad made implying that investment in crypto is simple and suitable for anyone, even those with limited knowledge of the sector.
“In reality, cryptocurrencies are very complex, and are highly difficult to value, not least because the rules of the game can change so quickly and investing in the crypto wild west can potentially lead to large losses.
“Complaints against Luno Money and Coinbase Europe were also upheld, with their adverts banned for irresponsibly taking advantage of consumers’ inexperience and for failing to illustrate the risk of the investment. Another YouTube video and Twitter bio were also banned for their irresponsible nature. The ASA is taking a forensic approach to each complaint, but with this deluge of adverts springing up across social media in particular, it appears the workload is getting significantly heavier. It’s no surprise that the ASA is now assessing reforms to its current financial advertising remit, with a view to including crypto currency as one of its priority areas, which may necessitate new powers. With an increasing number of financially vulnerable people being lured in, it would seem very sensible to give the ASA more firepower to help it clamp down on irresponsible advertising.
“There is clearly a growing concern at the heart of regulatory bodies about the increased speculation surrounding crypto currencies. The ASA judgements come after repeated warnings from the Financial Conduct Authority that consumers could lose all their money if they succumb to the promises of fast and high returns. Far too many financially vulnerable consumers risk getting caught up out, given the high volatility of the coins and tokens. What is particularly worrying is that 14% of UK holders of crypto are getting into debt to speculate.
“The ruling comes at a timely moment, given that the value of Bitcoin has dropped by 30% since its all-time high five weeks ago. It’s plummeted from a record level of over $68 thousand, down to just over $48,000 today. The rollercoaster ride is set to continue given that crypto assets are also highly sensitive to the fortunes of the stock market and were propelled higher in an era of ultra cheap money. As speculation swirls about how rapidly central banks will tighten mass bond buying programmes and start raising interest rates, given soaring inflation, they are likely to stay volatile.
“Although cryptocurrencies look set to be here to stay in some form, the long-term direction of travel in terms of price is far from certain. Bitcoin’s surges in 2021 have also come off the back of increased corporate and institutional interest, with more organisations as well as hard core fans appearing to have more confidence in the longer term future of the currency. But it’s still highly difficult to assess the right time to buy or sell because it’s so speculative and volatile. A lot of the demand has been from people hoping to benefit from future price rises rather than using bitcoin as a means of exchange. The past few months have seen the firmest indications yet that that regulators may soon step in to break up the crypto party although it’s still unclear what level of regulation will be imposed.”