Google eases ban on crypto ads in US and Japan

Last week, Google announced that it would allow certain regulated cryptocurrency exchanges to advertise in the United States and Japan, following a similar move by Facebook. 

This announcement eases the earlier blanket ban on all cryptocurrency advertising which Google enacted in March in response to wide press coverage of scamming and Ponzi schemes in the cryptocurrency industry.

Rationale for the initial ban

The rationale for the initial ban was one of caution.  Google parent company Alphabet makes roughly 84 percent of its total revenue from advertising and was concerned about the reputational harm that could result from consumers being “duped” by advertisements offered by unscrupulous cryptocurrency exchanges on its platform. 

Google’s ban also implied unease and uncertainty surrounding the developing regulatory framework around cryptocurrency exchanges.  As regulators worldwide attempted to decide how - and even whether - to design rules surrounding cryptocurrency, advertisers and the companies like Google which run those ads, were left to fret over their potential future liability for disseminating information which regulators could find harmful to consumers.

Developing regulatory sphere

Deviating from Facebook’s new crypto ad policy, which requires crypto advertisers to present licenses they have obtained, whether they are traded on a public stock exchange, and other relevant public background on their business, Google’s policy places more faith in local regulatory regimes. Google’s decision to partially lift its ban in these two countries is reflective of the developing regulatory sphere.  Regulators in both the USand Japan have been among the fastest to publish guidance for cryptocurrency exchanges. 

In the US, the Securities and Exchange Commission has now made it clear that:

 "if a platform offers trading of digital assets that are securities and operates as an "exchange," as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration.” 

While in Japan, regulations mandate the need for a special license from the Financial Services Authority to operate a cryptocurrency exchange.

It is possible that advertisements may soon be allowed in European Union member states, which have granted licenses to some cryptocurrency exchanges to operate within their territories.  However, these licenses have yet to be judicially tested and Google’s ad ban for the EU may remain in place until the validity of these licenses is more certain.

Instilling confidence?

Google’s more relaxed policies surrounding cryptocurrency advertisements and the subsequent proliferation of ads on Google may have the effect of legitimizing the crypto industry and instilling confidence in the regulatory schemes which are being developed in response to growth in the industry.

The rolling back of a blanket ban could suggest to the market and to consumers that Google has been convinced by certain cryptocurrency exchanges and regulators that its former concerns surrounding cryptocurrency advertisements (i.e. reputational and legal liability) have been, at least partially, assuaged. 

This, in turn, could suggest to consumers that those cryptocurrency exchanges which advertise on Google are properly regulated, legitimate investments and they do not need to be concerned about fake exchanges (a 21st century “pump and dump”) or exchanges being compromised by hackers.   

What happens next?

Whether these assumptions are true remains to be seen. Watch this space for further updates as Google officially rolls out its new policy.