Cryptomarketing: what can we say (and not say) in Canada?
Good question. Crypto companies try to attract new customers with flashy marketing. Sometimes the offers seem far too good to be true, promising outsized returns or little or no investment risk.
Here is a recent example that you may have seen the headlines of: the collapse of Alameda Research, a crypto trading firm, and its subsidiary FTX, one of the largest cryptocurrency exchanges in the world, in November 2022. I won’t go back too much… The story is Still in development– but recent reports by the crypto news site The block revealed that in 2018, Alameda Research allegedly told potential investors that it could provide a high return on investment (ROI) with “no risk” and “no downside”.
Alameda Research and FTX are in the news today, but let’s not forget BitConnectthe crypto platform that paraded Incredibly high ROI in its marketing materials while claiming no risk. In February 2022, the founder of BitConnect was indicted for orchestrating a global Ponzi scheme that allegedly took $2.4 billion of investors’ money. In September, the North American developer of the platform was sentenced to 38 months in prison for his role in BitConnect, which the United States justice department described as “a massive fraudulent cryptocurrency scheme”.
It’s alarming that companies can mislead people like these two did. However, learning more about the rules of crypto marketing can help investors find reputable service providers.
What can crypto advertising say in Canada?
In Canada, securities regulators have issued directives to find out how crypto-trading platforms (CTPs) should promote themselves and market themselves, including on social networks.
For example, CTPs should not make statements that they cannot support with evidence; they must avoid calling themselves a crypto “exchange” or “market” unless they qualify under applicable securities law or are exempt from such requirements; and they should avoid “gambling” type promotions (such as contests and limited time offers), which “may inappropriately encourage investors to engage in excessively risky transactions, taking risks that they would normally avoid”.
Let me give you an example of how crypto marketing works at CoinSmart, which is a regulated cryptocurrency exchange compliant with the Ontario Securities Commission. In our marketing, we can tell people to come to our website. We may offer discounts on deposits. We can even give new customers a small amount of bitcoins if they deposit a minimum amount. However, we can not directly ask or tell them to buy cryptocurrencies.
So, judging by the marketing messages alone, how can you tell if the company’s advertising is legitimate or not? Here are some general tips: