The Monetary Authority of Singapore (MAS) has recently taken steps to discourage the advertising of digital payment tokens (DPT) trading in public areas, citing the “highly risky” nature of such activities. So how can crypto companies communicate about DPT trading in a responsible manner?
On January 17, MAS issued a set of guidelines discouraging the promotion of cryptocurrency trading in public areas such as public transport, venues, broadcast media, third-party websites, social media platforms, events, and roadshows. Joint activities with social media influencers and third-party websites to solicit new customers are also discouraged.
Crypto platforms and companies are, however, permitted to promote their services on their own corporate websites, mobile applications, and official social media accounts.
The deal? Crypto companies must not trivialise the risks of trading in DPT in a manner that is inconsistent with or contradicts the risk disclosures required under the Payment Services Act.
While all this sure sounds like a mouthful, the aim of these guidelines is to protect the retail investor who could be swept off their feet by content around how seemingly easy it is to make money by trading crypto. One only has to log into TikTok to see videos of “investors” showing off huge profits buying certain tokens or sharing hacks on how to time the market in order to make a windfall.
Given the nature of a TikTok video, these numbers are rarely substantiated and you won’t really know if the creator has indeed put money into the tokens they’re promoting.
“Markets around the world, both at the institutional and retail level, have indicated strong interest in the crypto market over the past year. Thus it’s not surprising that regulations have been enacted to encourage a prudent approach to the crypto market,” says Yusho Liu, CEO of Coinhako, a cryptocurrency exchange that’s received in-principle approval from the MAS to provide DPT services under the Payment Services Act as a major payment institution.
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Not suitable for the general public
Underlying the motivation for this initiative is the regulator’s view that DPT trading is not suitable for the general public. So, what is it that makes it so “highly risky”?
Edward Cooper, Head of Crypto at Revolut in London, says that while cryptocurrency can be a volatile asset class, the volatility is not what makes it riskier than, for instance, investing in stocks. This, he points out, is evidenced by the recent 20 per cent drop in Netflix’s share price in after-hours trading and the incredible 1,600 per cent rise, and subsequent fall, of GameStop’s share price in January 2021.
“The main risk is that, due to the lack of regulation in the space, there are many scams and schemes which hurt consumers that are promoted pretty aggressively, including pump-and-dump schemes on some tokens that don’t have real utility or a solid technical team behind them, but have just been created to quickly make money for their creators before being abandoned.”
In fact, Singapore isn’t the only market to clamp down on crypto advertising. Around the same time, the MAS made its announcement, the UK government shared its plans to bring cryptocurrency ads under tighter scrutiny and crackdown on “misleading” claims that may cause investors to lose money.
“At Revolut, we check every token before offering it to customers. Meaning that only high-quality tokens are listed, but many other players in the space don’t currently follow this practice. These steps by the Singapore and UK regulators will help protect investors, add legitimacy to the space, and allow consumers to more easily choose reputable crypto services and projects and tokens,” Cooper concludes.
Revolut Singapore is in the process of applying for a licence to provide DPT services under the Payment Services Act.
Communicating about crypto in a responsible manner
The first thing to know is that not all forms of publicity are disallowed. Companies are still permitted to talk about their services on their own websites, apps, and official social media accounts.
This means unless someone proactively searches for the content, he or she is unlikely to encounter any publicity by a crypto company when going about their everyday business.
Joel Lah, Account Director of Redhill, a communications agency that counts Hg Exchange and Mongol NFT amongst their clients, believes that education should become the focus of engagement by crypto companies to support their audiences in making the right choices.
Deepak Khanna, Head of Wealth and Trading at Revolut Singapore, agrees. “Financial services providers have a duty of care towards investors. Business growth is always contingent on building trust with investors. These new guidelines help set common standards and improved quality of customer communications, all of which is good for investors and the industry in the long run.”
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What does it mean then to talk about crypto in a responsible way? Lah opines that it isn’t about who has the “biggest advertising budget” but rather who can demonstrate the most credibility. “Failure to build trust will most certainly have a negative impact.” He shares three principles crypto companies should take on board for their communications strategy:
Focus on long-term credibility
Crypto firms should be wary of targeting a quick profit as the main goal. They should instead focus on creating a long-standing, credible company. Credibility is built over time whether through thought-leadership or education. Be consistent with your communications and avoid making incendiary comments to create short-lived hype.
Honesty is the best policy
Companies should remain honest in their communications. Consumers are becoming increasingly discerning — exaggerating certain benefits will be met with resistance. Companies should be transparent and truthful about their strengths, weaknesses, and future plans, and cut down on hubris.
Showcase collaboration
It is crucial for crypto companies to showcase their openness by working with regulators and other industry players because this shows they want to play a part in creating a more mature crypto industry. In order for the industry to grow, it is essential for all players to collaborate, share insights and develop the space together.
Watch out for the hype
For content specialist, Tan Lili, her unwillingness to invest in cryptocurrencies arises directly from how people make earning a quick buck look so easy. “I’ve been seeing so many crypto ads featuring celebrities and influencers on social media. To be honest, seeing such content puts me off crypto trading even more, especially on platforms like TikTok which has a younger audience. To me, this is just irresponsible marketing,” she says.
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This sentiment is backed by Lah. “Social media has given everyone a voice, which is great for freedom of speech but can be dangerous when unqualified financial advice is being dished out so freely.”
He cites the recent example of the Squid Coin (SQUID), a token inspired by the popular Netflix series Squid Game.
“It became the most hyped cryptocurrency across social media platforms, its valuation even shot up to US$2,861 per coin overnight, with influencers creating posts about its massive surge and potential price predictions. However, just a few weeks later, SQUID plummeted to $0 as a result of a rug pull— an event triggered when the creators of the token cashed out their coins for real money. This left many investors with nothing.”
Most people with a healthy level of commonsense will regard the overly-enthusiastic promotion of any money-making method with scepticism.
Those who are taken in by content promising huge returns on any investments are likely swayed by the absence of jargon and the use of dazzling visuals. It is this group of investors that needs to be protected.
As the crypto industry matures and sheds its image as a collection of novelty investments, companies will have to arm their customers with the power to make the best decisions for their money through education and thought-leadership and find ways to make such content engaging across generations.
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