Written evidence submitted by ASA system

ASA system submission to the DCMS Committee’s inquiry Non-Fungible Tokens (NFTs) and the blockchain

  1. Background and Introduction


1.1.                                                                                                                                                                                                                                                                              This submission is provided by the Advertising Standards Authority (ASA), the Committee of Advertising Practice (CAP) and the Broadcast Committee of Advertising Practice (BCAP) – the ‘ASA system.’    


1.2.   The ASA is the UK’s independent advertising regulator. We have been administering the non-broadcast Advertising Code (written and maintained by CAP) for 60 years and the broadcast Advertising Code (written and maintained by BCAP) for 18, with our remit further extended in 2011 to include companies’ advertising claims on their own websites and in social media spaces under their control.


1.3.   The ASA system is the ‘one stop shop’ for ensuring that UK advertising is legal, decent, honest, and truthful. Our work includes undertaking proactive projects and acting on complaints to tackle misleading, harmful or offensive advertisements. We are committed to evidence-based regulation, and we continually review new evidence to ensure the rules and our application of them remain fit-for-purpose.


1.4.   As the UK’s frontline advertising regulator, the ASA brings together different statutory, co-regulatory and self-regulatory enforcement mechanisms so they appear seamless to people and businesses. Our system involves the active participation of a range of legal backstops in the consumer protection landscape. We work closely with a network of partner regulators including Ofcom, the Gambling Commission, the Information Commissioner’s Office, the Medicines and Healthcare products Regulatory Agency, the Financial Conduct Authority and the Competition and Markets Authority.


1.5.   Through the sharing of information, joined-up enforcement action and referral processes, our partners bolster our regulation and assist us, where necessary, to bring non-compliant advertisers into line. Together, this ‘collective regulation’ helps to protect people and responsible business from irresponsible ads: ads that mislead, harm or offend their audience.


1.6.   We also bring together the ad industry and media owners to set, maintain and police high standards. The UK Advertising Codes are drafted and maintained by the industry committees of CAP and BCAP, supported by experts in our Regulatory Policy team. This means businesses have a direct stake and an enlightened self-interest in adhering to the standards they set and creating a level-playing field amongst them. There are multiple checks and balances in place to ensure the committees’ development of rules and guidance is transparent, open to scrutiny and adheres to the principles of good regulation. These include calls for evidence and public consultations; mandatory regard to the advice of an expert independent consumer panel; Ofcom signing off on BCAP rule changes; the ASA System’s processes being open to judicial review and more besides. All to ensure the system is wholly accountable to everyone with a stake in advertising.


1.7.   The UK Advertising Codes include rules reflecting specific legal provisions and rules developed through separate regulatory process, which in combination ensure ads don’t mislead, harm or seriously offend their audience. The inclusion of the rules in the UK Advertising Codes has enormous benefits for responsible businesses and for consumers, who benefit from the protection the rules afford.


1.8.   In addition to investigating ads, we also provide a wealth of training and advice services (most of which are free) for advertisers, agencies and media to help them understand their responsibilities under the Codes and to ensure that fewer problem ads appear in the first place. CAP and BCAP provided over a million pieces of advice and training in 2022.


1.9.   The ASA system is providing this written submission in response to the DCMS Committee’s inquiry Non-Fungible Tokens (NFTs) and the blockchain.


  1. The ASA’s remit over advertising for financial products


2.1.   The ASA has a very close working relationship with the FCA, which is an important regulatory partner. As mentioned in 1.5, working with the FCA and other regulators is essential to consumer protection, and we place great emphasis on effective collaboration to avoid regulatory gaps.


2.2.   The advertising of financial products is regulated by the FCA and the ASA, with a division in remit between the two regulators dependent on whether the product or service is an FCA-regulated activity, the medium in which the ad appeared and the specific content of the ad.


2.3.   All ads for FCA-regulated financial products (including investments, insurance, pensions, mortgages, deposit and savings accounts, consumer credit, peer to peer lending, credit brokerage and debt management providers) fall under the FCA’s rules for financial promotions.


2.4.   In line with a Memorandum of Understanding between the ASA and FCA, complaints received by the ASA about the technical elements of non-broadcast ads for FCA-regulated products are referred to the FCA. Matters concerning the non-technical elements of these ads, such as serious or widespread offence or social responsibility, fall within the ASA’s remit.


2.5.   In broadcast media, due to inherited statutory responsibilities, the ASA considers all complaints received about both technical and non-technical elements of ads for FCA-regulated financial products, ensuing communication with the FCA where there is overlap of remit. The FCA, however, can also take action against broadcast ads for FCA-regulated financial products where it identifies concerns.


2.6.   The online advertising sector is characterised by a complex eco-system with multiple players. As well as referral mechanism to the FCA, under our strategy, More Impact Online, we’re also working closely with online platforms including Meta and Google. They act as enforcement partners to remove problems ads.


  1. The ASA’s remit over NFTs


3.1.        Cryptoassets including NFTs as defined by the FCA, are: “cryptographically secured digital representations of value or contractual rights that use some type of distributed ledger technology (DLT) and can be transferred, stored or traded electronically.”


3.2.        NFTs are not regulated by the FCA and, as such, the FCA currently does not exercise powers over their advertising in the UK.


3.3.        In 2022, the Government announced plans to strengthen the rules for the advertising of some forms of cryptoassets to protect consumers from misleading claims by bringing them into the scope of the Financial Promotions Order and regulation by the FCA.


3.4.        NFTs are currently excluded from the Government’s announced plans and, unless that changes, will therefore remain under the remit of the UK Advertising Code, administered by the ASA, for issues relating to both misleadingness and responsibility.


3.5.   We are aware of the emergence of ‘fractional NFTs,’ where an NFT is split into a number of equivalent tokens for purchase by multiple owners, which are tradable. We understand that in this scenario a fractional NFT would constitute a fungible token and as such, could then impact whether ads for fractional NFTs would come under the Financial Promotions Order.


  1. ASA action on cryptoasset advertising more widely


4.1.   In 2021, we identified cryptocurrency advertising as a ‘red alert’ high priority issue and took the decision to proactively investigate representative cryptocurrency ads across different online media to act as precedent-setting cases that would establish the ground-rules for all advertising across all online media. We published 12 rulings together in late December 2021 to ensure widespread media impact and to bring to the attention of the public the risks involved with cryptocurrencies.


4.2.   As a result of our 2021 precedent-setting rulings, cryptocurrency ads must adhere to the following requirements:







4.3.   Following that we issued an Enforcement Notice to more than 50 companies that advertise cryptocurrencies to the UK public, instructing them to review their ads and to ensure they understand and are complying with the rules so that consumers are treated fairly.


4.4.   Our Compliance team has worked closely with our in-house Data Science team to enable comprehensive follow-up monitoring using AI tools that automatically monitor the ads and social media posts of the relevant companies, using machine-learning algorithms to identify potentially problematic ads, allowing for swift intervention where needed.


4.5.   This has enabled us to have a near 100% compliance rate with the requirements set in our Enforcement Notice, and where advertisers step out of line, we quickly ensure that their ads are taken down. If we see any continuing patterns of non-compliance, we swiftly follow up with them to ensure that they understand their obligations.


4.6.   In light of the similar risks to consumers posed by utility/fan tokens, we initiated a proactive investigation against advertising by Arsenal Football Club plc. The ruling set out the following requirements for the advertising of utility/fan tokens:






  1. Background on NFT advertising


5.1.   NFTs are unique, non-interchangeable units of data stored on a blockchain. NFTs are also a form of cryptoasset, but with the difference being that NFTs cannot be replicated and therefore cannot be traded or exchanged at equivalency or used for commercial transactions. However, they can be bought and sold online, usually through NFT marketplaces. NFTs can be created to represent both tangible and non-tangible items in a digital form.


5.2.   There was an explosion in the popularity of NFTs in 2021, indicated by their rapidly growing presence in the world of collectibles and digital art, their collaboration with noted celebrities or sportspeople and the media attention surrounding the sale of particular NFTs at auction for very high prices, sometimes reaching into the millions.


5.3.   As with other cryptoassets, lack of regulation and high volatility means that NFTs present similar risks to consumers, particularly for those who wish to resell them, highlighted by the 2022 crash in the NFT market and financial loss for consumers following a decline in the crypto market. However, compared to cryptocurrency there is a greater level of nuance and complexity associated with NFTs.


5.4.   NFTs can represent any item and may be sold by a large variety of retailers which includes cryptoasset firms and NFT marketplaces but also sports teams, fashion retailers, jewellers, musicians, artists and museums, for both commercial and charity-linked purposes. NFTs are also becoming more prevalent for purchase within games, where they may be used as avatars, skins or clothing and so may be advertised both within the game or in ads in other media. NFTs can also have a utility function, where they grant their owner privileges, rights, or rewards which they would not otherwise be able to access. This wide range of sectors in which NFTs are promoted presents the possibility of many business models and scenarios, which increases the regulatory challenge.


5.5.   NFTs have found their way onto online gambling platforms, and can be incorporated into casinos, sport and esports betting. We understand that the Gambling Commission has taken an interest in several NFT-based services in relation to whether they may constitute an illegal lottery, or alternatively, whether they are an unlicensed gambling platform. In reference to NFTs, the Gambling Commission have acknowledged that the boundaries of what can be defined and regulated as gambling products are becoming increasingly blurred.


5.6.   ASA intelligence suggests that NFTs are an attractive mechanism for scams by criminal actors. A well-known NFT-related scam is a ‘rug pull,’ where developers set up an NFT project, drive up the price through promotional hype, sell their NFTs, then suddenly stop backing it, plunging its value to zero. There may be difficulties in identifying which ads are for legitimate or scam NFTs and how to regulate across these two scenarios.


  1. ASA action on NFT advertising


6.1.   We’re aware of the wider debate about whether all NFT ads should be subject to the same risk warnings and qualifications as cryptocurrency ads where they are presented, for example as collectibles, in a gaming context or which have a utility function, and which don’t include any terminology or claims associated with investment activity.


6.2.   There have been discussions about whether it is reasonable to consider that an NFT is being marketed as an investment product in all circumstances, particularly in the absence of any implied or explicit investment terminology.


6.3.   However, we also note that regardless of the context in which an NFT is promoted, in most circumstances consumers need to have a digital wallet funded with cryptocurrency, which may potentially expose them to further risk. NFTs are still a form of cryptoasset which present the same risks as other cryptoassets in that they are unregulated by UK financial authorities and are volatile.


6.4.   In late December 2022, the ASA published three rulings against ads for NFTs:













6.5.   These three rulings set out some basic principles for NFT advertising with respect to risk warnings, regulatory and performance information including that:







6.6.   Because there is arguably a greater level of complexity and nuance associated with NFTs, we welcome, and are seeking, views from other regulatory partners, both to benefit from a range of expert views and to work towards comprehensive, complementary and consistent regulation of NFT ads.




Kate Roche

Public Affairs Advisor, Advertising Standards Authority