Unregulated advertising of crypto is normalising these risky assets
Football clubs, celebrities and big brand names have all contributed to normalising these volatile digital assets, Which? warns.
In early 2022, a Which? employee ordered a pair of shoes online from Schuh. When the package arrived, it included an envelope marked ‘exclusive deals’. Inside was a leaflet from crypto exchange website Luno, offering £10 worth of free bitcoin in exchange for registering an account.
A year earlier, Luno had been criticised by the Advertising Standards Authority (ASA) for a London Underground ad that read: ‘If you’re seeing bitcoin on the Underground, it’s time to buy.’ The ASA said the Underground ad was misleading and left out essential investment warnings, including that Luno and bitcoin are both unregulated, and that investments can go down in value as well as up.
While the Luno leaflet later received in the shoe package did contain these warnings, its presence there seems incongruous.
Risky digital assets move into the mainstream
With 10% of UK adults holding or having previously held a cryptoasset, according to a recent survey carried out by HMRC, it’s clear that these highly technical digital assets are becoming normalised.
One greatly touted selling point in the early days of bitcoin was blockchain’s unalterableness and consequent imperviousness to fraud. This database belongs to everybody and nobody at the same time – you add a transaction to the blockchain simply by buying or selling bitcoin and nobody can then alter or reverse it.
Yet in real-world use, if a fraudster persuades you to send them cryptocurrency, or if the exchange that hosts your digital wallet vanishes, there’s no recourse.
The lawless, decentralised nature of the new technology was itself seen as a selling point by early adopters, as behavioural scientist Dr Merle van den Akker explained: ‘The first wave of crypto, before 2014, was very ideologically driven and anarchistic in nature. It was adopted predominantly by idealists who either didn't trust their government or economic system, or wished for the latter to change through innovation.'
But things began to change: ‘Post-2015 [demand] was driven by the fact that the cryptocurrency platforms became better. Ethereum, for example, became quite good. More tech-savvy people started paying attention to it and it was heralded as the next thing technologically and economically.'
Those buying coins and tokens have no recourse to the Financial Services Compensation Scheme if companies collapse, or the Financial Ombudsman Service if they believe they were misled, mis-sold, or their account mismanaged in some way.
Crypto explained
Digital assets: an umbrella term encompassing cryptocurrencies or assets, and a somewhat more nebulous and recent concept, non-fungible tokens or NFTs for short.
Cryptocurrency: are a type of digital currency which run on blockchain and best thought of as an unalterable, decentralised digital ledger of transactions.
Blockchain: differs from traditional computer databases which are centrally controlled by someone, with existing entries capable of being changed or deleted. Among the most well-known are Ethereum, Tether and parody coin Dogecoin.
NFTs: run on a blockchain and are virtual tokens denoting ownership – typically of digital art or virtual trading cards. NFTs can be bought and sold, and rise or fall in value depending on demand. NFT owners have no tangible claim over the thing they allegedly ‘own’. Digital artworks can be copied and pasted by anyone, not just the NFT holder. The NFT holder is owed no royalties for this.
Are celebrities fuelling the craze?
In October 2017, former football manager Harry Redknapp tweeted: ‘Proper excited about Mobile Cryptocurrency! I’m in, get involved!’
The tweet included a link to a website selling the new digital coin called ‘electroneum’. Redknapp’s electroneum tweet proved a startling early example of the subsequent wave of celebrity endorsements for crypto.
A spokesperson for Harry Redknapp stated: ‘Harry has no affiliation with any cryptocurrency schemes and has never been paid to promote any similar product. He has though, like many others, invested in cryptocurrency in the past and experienced both the risks and rewards of doing so.’
It’s now commonplace for major figures in football to promote their own NFTs to fans. Last year, French midfielder Paul Pogba declared himself ‘Father of Dragons’ while launching his NFT, a series of digital artworks.
Father of Dragons is here! I am happy to announce our partnership with @cryptodragons - the NFT champion. Can’t wait to get my first ever NFT - an Egg with a Dragon inside.#cryptodragons #NFT #dragons #ad pic.twitter.com/31cxXi8Wog
— Paul Pogba (@paulpogba) November 15, 2021
The eggs hatch and the dragons can be mated or entered into fights with those of other cryptodragon owners on an exclusive online platform. The Athletic reports that at the time of Pogba’s launch tweet, a cryptodragon had sold for 35 ethereum (ETH) – equivalent at that time to £135,000. However, interest has slowed substantially, with more recent sales worth just tens of pounds.
The same is true for the coins and tokens promoted by almost every Premier League side – almost all of which have crashed in value, according to a June 2022 investigation by The Athletic, leaving fans disgruntled and out of pocket.
Celebrity endorsement culture within crypto reaches far beyond football. A vast array of stars, including Reese Witherspoon, Gwyneth Paltrow, Kim Kardashian, Floyd Mayweather and Paris Hilton, have promoted crypto via ads on social media, with many of them later criticised for their perceived silence as the promoted assets crashed in value.
Dr van den Akker explains that so-called influencers are also part of the mix: ‘People under the age of 26 consume a lot of YouTube content. YouTube has become known for crypto ‘pump and dump’ schemes [where value is artificially inflated by hype, only to crash once the founders sell up]. A lot of famous YouTubers have been accused of this.’
Regulating crypto
It’s the task of the ASA to identify misleading claims at source, in ads or social media posts sponsored by the industry, and ban them.
Earlier this year, the ASA and CAP (the Committee of Advertising Practice) issued a red alert and enforcement notice signalling its concern about crypto advertising, vowing extra scrutiny and issuing clear guidelines about what warnings adverts should contain. It also vowed to report the worst offenders to Trading Standards. Beyond this, its powers are limited.
Out of all the companies with code breaches for crypto ads, Arsenal FC is number three for the number of breaches, according to research by website Crypto Head.
Indeed, it’s the only football club in the top 10 – the others are crypto-specific companies. The advertiser with the largest number of breaches was crypto.com, an exchange and NFT marketplace endorsed by Hollywood actor Matt Damon. Crypto.com stressed to us that all 13 of its breaches derived from one advertising campaign, and that it isn’t a repeat offender.
Fellow exchange platform Coinbase was second, while Luno Money tied with Arsenal in third place.
The UK government had been expected to announce a new regulatory framework for cryptocurrencies quite soon, but with recent changes in government it’s likely this will be further delayed.
The ASA told us it ‘welcomed the government’s announcement on strengthening the rules around fungible cryptoassets. Bringing the regulation of ads for such products in line with other financial products will provide more certainty and bolster protections for consumers.
‘They need to know about the risks of investing in cryptoassets and companies should make sure that their ads aren’t misleading or socially irresponsible by taking advantage of consumers’ lack of awareness around these complex and volatile products.’
It added that cryptoasset ads ‘remain a priority for us’ and it’s been conducting ‘proactive monitoring’ to find issues and draft guidelines on responsible advertising.
Organisations respond
Crypto.com said it ‘immediately withdrew ads in the UK market which were flagged by the ASA’, adding that it ‘appreciate(s) the collaborative engagement’ with the ASA and regularly refines its marketing efforts to align with the ASA’s guidance, ensuring ‘full transparency for our customers’.
Luno said that it ‘undertakes a range of activity to inform customers and potential customers about the cryptocurrency landscape. Since the ASA published guidance about crypto advertising in November 2021, we have worked closely with them to ensure all our advertising and promotional materials are compliant.’
YouTube owner Google pointed to its ‘deceptive practices’ policy that prohibits scams. It added that in the first three months it removed more than 3.9m channels, 367,000 videos and 663m comments for violating its policies around spam, scams and deceptive practices. Google says it uses ‘machine learning’ to identify patterns of behaviour which indicate ‘violative content’. Some content is sent proactively and some sent for review by human moderators.
We also approached Electroneum, Coinbase, Arsenal FC and Schuh for comment, but received no responses. We were unable to reach the Premier League, Matt Damon or Paul Pogba.
