Facebook’s Relationship with Cryptocurrency
Facebook recently transformed its cryptocurrency advertising ban into a narrower and a more permissive policy, leaving initial coin offerings and binary options advertising banned, but permitting cryptocurrency advertising, subject to an application process and due diligence.
Cryptocurrency thus joins Facebook’s list of restricted product types for advertising, which list also includes, for example, alcohol, online dating, gambling, pharmaceuticals and political advertising. The ICO advertising prohibition is described as being associated with Facebook’s policy against ads that promote financial products frequently associated with misleading or deceptive promotional practices, and with Facebook’s stage of technological development in the detection of deceptive and misleading advertising practices.
In contrast, Linked In’s policies indicate a broader outright ban against all “virtual currency or cryptocurrency” advertising.
There is good reason for social media organizations to worry about cryptocurrency advertising. The social media giants already have concerns relating to, and policies focused on, advertising legality for other special industries with advertising prohibitions or limitations such as alcohol and marijuana. Also, liability risk arising from platform content has become a bigger global legal issue over the recent years even for technology platforms that are not primary but rather secondary publishers, like Google. And specifically in the case of cryptocurrency, we know that there are issues around promotion. In Canada and the United States, for example, currently the securities regulators view a majority of existing virtual currencies as securities. Promotion of securities to the general public, absent proper registrations or regulatory exemptions, could be construed as engaging in registrable activities (those of a broker/ dealer) without being appropriately registered, which would be in breach of securities laws.
In any event, Zuckerberg’s shift to a relatively more permissive approach makes sense in light of Facebook’s internal experimentation with blockchain technology. This seems like a creative way to potentially shift more of the onus and liability to the advertiser who is subject to and bound by application requirements, compliance terms, representations and warranties, all of which may further a due diligence defence for Facebook.
It will be interesting to observe how these corporate practices and associated law evolve, including:
- how much further will social media giants stretch their policies and responsibilities not only in law but in more grey areas like ethics?
- will the internal policies and standards created by collective behavior of search engines and social media giants over time become codified into law by policymakers?
- What categories will emerge to differentiate advertising laws as between security cryptocurrencies and utility cryptocurrencies?
- Will advertising (as distinguished from PR or education) become a thing of the past for cryptocurrencies and ICOs as the regulatory rules evolve?