Are the walls closing in on cryptocurrency ads?

When Spike Lee – the famed director behind films like ‘Malcolm X’ – appeared on screens last week extolling the benefits of why “old money is out, new money is in” in a campaign for crypto ATM operator Coin Cloud, he faced a swathe of criticism for failing to spot the hypocrisies.

Lauding Bitcoin et al as “the digital rebellion” against a financial system that “systematically oppresses” people of color and women, he marched through Wall Street denouncing archaic financial systems and encouraging the nation to cash in their dollars for cryptocurrency.

“Do your research,” Lee says between hyperbole. Is it a warning? If not, it should be.

According to the Federal Deposit Insurance Corporation, 5.4% of US households do not have a bank account, with the primary reason being a lack of sufficient funds to open one.

Yet these 20 million Americans appear to be the exact target audience that Lee was encouraging to rush to a Coin Cloud ATM to exchange their “old money” for a new currency that’s “inclusive and fluid”.

Critics were quick to highlight that this group, arguably more than any other, is susceptible to the promise of making a quick buck without proper consideration for the risks involved with investing in something as volatile as cryptocurrency.

According to Glassnode, between May 17 and May 24, Bitcoin holders realized net losses of $2.56bn. Glassnode says most of these sellers were new ‘bitcoiners’ who had acquired and subsequently sold the currency within the past three to six months.

In a survey of UK consumers conducted by behavioral finance experts Oxford Risk, 36% cryptocurrency investors admit their understanding of the sector was poor or non-existent.

But emotional factors such as the ‘fear of missing out‘ are driving growth, with around 35% of adults saying they have read a lot about huge price rises while 15% say they have been encouraged to buy by friends or family.

Spike Lee isn’t the only celebrity to lend his star-power to cryptocurrency ads.

In the past, crypto companies had been used to marketing their products on pockets of the internet – Telegram groups, online chatrooms and invitation-only forums. But as Bitcoin hit headlines, large investors like Tesla and Square backed various Coins, and financial giants like BNY Mellon, Visa and Mastercard revised their policies to support crypto projects, the crypto sector began to experiment with mainstream advertising. And their marketing pockets are deep if the calibre of celebs they've signed on to front major ad campaigns is anything to go by.

Actor Neil Patrick Harris has bragged of the benefits of being an early Bitcoin investo for a CoinFlip campaign, Alec Baldwin has mocked those who think trading crypto on Etoro should be anything other that quick and easy, while Tom Brady and Gisele Bündchen have become brand ambassadors for FTX to encourage adoption of the digital currency.

These companies are also spending big on digital advertising, specifically with social media influencers.

Internet sensation Kim Kardashian West promoted Ethereummax – a so-called alternative-coin, or ‘alt-coin’, to the more established Bitcoin – to her 228 million Instagram followers last month.

Over on TikTok, young stars Charli and Dixie D’Amelio turned their combined 169 million followers’ attentions to cryptocurrency exchange Gemini as part of a sponsored campaign. In fact, the use of influencers by crypto companies on TikTok was so widespread they were given the moniker ‘Fintok advisors’.

Cracking down

But concern has been mounting within the walls of advertising regulators over the lack of scrutiny given to cryptocurrency ads, especially those targeting a young and financially naive audience.

The Advertising Standards Authority (ASA) in the UK recently said that it would be taking a more serious look at any crypto advertising. It came following the ban of an OOH campaign from UK-based exchange Luno, which ran a series of ads reading: “If you’re seeing Bitcoin on the Underground, it’s time to buy.”

The watchdog said it plans to offer guidance for companies in the coming weeks, and is ”considering whether further action is needed” around social media influencers promoting investments in the space without disclosing enough about the risks.

Further afield, the Advertising Standards Council of India (ASCI) said this week that it was looking into the rise of crypto ads after identifying it as an “emerging area of concern”.

But it’s slow progress. Arguably too slow for the fast paced nature of this sector, where scams and fraud are all too common.

”It is inevitable that digital asset investments and crypto currency ads in particular will face greater scrutiny and tighter regulation. It’s really a case of slow regulators catching up with fast-developing technology and greater public awareness,” says Rafe Blandford, chief product officer at Digitas UK .

“Focus is sharper on this sector because of the associated consumer risk with any investment instrument, especially in what currently feels like a Wild West atmosphere. Because country by country legislation can be slow, we can expect to see ad networks enacting their own policies and self-regulation.”

Big networks U-turn

Atomic London is an advertising agency that counts Etoro – a trading platform that lists numerous cryptocurrencies – among its clients.

The agency‘s chief executive Jon Goulding said he is in no doubt that a clamp down in crypto advertising is coming. However, he raised concerns over how effective it would be when there remains no official regulation by the Financial Conduct Authority (FCA), agreeing with Blandford that ultimately we’ll see a network-level stance taken, rather than anything government mandated.

"With most crypto currencies not regulated by the FCA, how are consumers really going to be protected?,” says Goulding. ”It comes down once again to whether digital and social media platforms will self-regulate and block crypto-advertisers from accessing their inventory and not simply whether there is an arbitrary ‘warning, you could lose all of your money’ as a small print alongside advertising messages.”

But rather than a move to stricter regulation of crypto advertising, it appears some digital and social platforms are slowly opening up to it.

Facebook – which owns Instagram – introduced a harsh crackdown back in 2018 with a blanket ban on crypto companies using its ad product. It has since lifted those restrictions to allow some adverts from pre-approved brands, and has no policy on its site in regards to influencers promoting crypto.

Like Facebook, Google had also previously taken a firm stance on crypto ads in an effort to clamp down on scams. But it appears to be loosening those restrictions for crypto exchanges and wallets, with reports emerging that it has invited potential advertisers to apply for commercial opportunities this month ahead of a change in policy in August.

“Given the track record of those platforms I don’t hold out much hope that they’ll suddenly start clamping down on it,” says Goulding. ”Ironically, when going on to digital publishers sites to look at articles relating to the ASA banning cryptocurrency advertising, the first pop up ad was for a cryptocurrency.”

TikTok, however, is getting tougher. Earlier this month it updated its content policy to ban – among other things – influencers from promoting cryptocurrency.

Aside from the platform, the ability for crypto brands to market to the masses may also come down to the ethical values of the advertising agencies they want to employ.

Many agencies have committed to AdNetZero to help the industry tackle the climate change emergency. Spearheaded by the Advertising Association, it‘s aiming to reduce the carbon impact of developing, producing and running UK advertising to real net zero by end 2030 and asking agencies to commit to make practical changes in the way they run their advertising operations.

”The environmental impact of crypto currencies is significant. Between start of 2016 and mid-2018 it’s estimated that crypto mining was responsible for up to 15 tons of carbon dioxide emissions. The most prominent crypto currencies – Bitcoin, Ethereum, Litecoin and Monero – used more electricity in 2017 than Ireland or Hong Kong,” says David Edwards, chief customer officer at AMV BBDO, suggesting that agencies may need to take a stand on bringing cryptocurrency brands on as clients.

“It’s estimated that for every $1 of Bitcoin value created it was responsible for creating $0.49 in health and climate change – otherwise known, I think, as cryptodamages. It seems sensible that there should be tighter advertising regulation until cryptocurrencies are subject to proper global regulations – with all the checks and balances in place regarding personal and environmental protections.”