Facebook, Inc. (NASDAQ:FB) broke the hearts and dashed the hopes of many aspiring Initial Coin Offerings (ICO) and crypto start-ups on Tuesday when it announced its new policy banning all ads for cryptocurrency products. According to TipRanks Crypto Center, most of the major coins are trading down since the announcement, except for Ethereum (ETH), which has added 8% over the past 7 days.
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Rob Leathern, a FB Director, said in a statement “We’ve created a new policy that prohibits ads that promote financial products and services that are frequently associated with misleading or deceptive promotional practices, such as binary options, initial coin offerings, and cryptocurrency.”
Facebook even offered some examples of ad copy to help illustrate what falls under the ban. Here are just some of those examples:
- “Start binary trading now and receive a 10-risk free trades bonus!”
- “Click here to learn more about our no-risk cryptocurrency that enables instant payments to anyone in the world”
- “New ICO! Buy tokens at a 15% discount NOW!”
- “Use your retirement funds to buy Bitcoin!”
Leathern went on to say that “This policy is intentionally broad.” But the statement goes on to suggest room for a partial reversal, with Facebook accepting that it may “revisit this policy and how we enforce it as our signals improve.” The ban extends beyond just Facebook to include Instagram as well as FAN, Facebook’s (third-party) Ad Network.
There are many who will say Facebook’s move is well advised, especially in the wake of the Security and Exchange Commission freezing $600 million in assets from the Texas-based ‘Initial Coin Offering’ from AriseBank. The SEC claims that Jared Rice illegally raised funds from individual investors without registering with regulators. Rice’s partner Stanley Ford, who lives in Dubai, is also accused.
Steve Peikin, co-head of SEC enforcement released a statement about the AriseBank case that sounded remarkably like the one coming from Facebook: “We will use all of our tools and remedies to protect investors from those who engage in fraudulent conduct in the emerging digital securities marketplace.” AriseBank managed to garner a lot of attention after hiring celebrity spokespeople like former World Heavyweight champ Evander Holyfield.
In another eerily similar case, Centra, a startup that raised over $30 million with its ‘Initial Coin Offering’ got hit with its own class action suit filed in U.S. district court in Florida. The suit alleges that Centra made multiple false claims, including that it had signed an agreement with Visa regarding the creation of its own planned card. Centra also employed a retired boxing great, Floyd Mayweather, as its celebrity spokesperson.
The use of celebrity endorsements and pricey ad campaigns to push crooked crypto products was undoubtedly a chief concern when Facebook crafted their new financial ads policy.
Looking beyond the borders of the US, the UK’s Financial Conduct Authority recently announced that it would also be taking a closer look at cryptocurrency offerings as well. However, The FCA was quick to point out that it planned to carefully review if the industry faced “undue regulatory hurdles”.
Facebook is clearly not alone in its attempt to mitigate the growing threat posed by the thousands of new alt-coins and crypto-startups. There are times when excessive caution is called for to protect the safety of your audience and the integrity of your brand. Even if that decision means you need to forfeit short-term ad revenue.
In a curious case of coincidence, Marc Andreessen and Peter Thiel, who sit on Facebook’s board of directors, are prominent crypto backers and investors. In addition, Facebook Messenger’s head honcho, David Marcus, also sits on the board of the popular crypto exchange Coinbase.
Every gold rush attracts its share of conmen and hucksters, and the cryptocurrency craze is no exception. Regulatory agencies from around the globe will continue to put measures in place aimed at protecting the public from an onslaught of crypto-crooks. Facebook has stepped up and taken a clear and admittedly “broad” stance against a burgeoning industry grappling with flimflam artists and fraudsters. Now we will wait and see if other online ad giants like Google are likely to follow suit.