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What Google’s ban on cryptocurrency ads means for traders

ALPHABET Inc’s Google on Wednesday became the latest internet giant to ban cryptocurrency-related advertising after Facebook, in a move that would cut off promotions for initial coin offerings and exchanges amid growing concerns about scams.

Interest in cryptocurrencies has surged in the last year as their value rocketed. That growth has spawned online advertising used by hundreds of companies trying to raise funds by launching new coins or encouraging people to trade in the virtual currencies.

“Improving the ads experience across the web, whether that’s removing harmful ads or intrusive ads, will continue to be a top priority for us,” said Scott Spencer, director of sustainable ads at Google, on the company’s official blog, The Keyword.

Under the new policy, Google said it would ban ads for cryptocurrencies and related content such as initial coin offerings, crypto exchanges and cryptocurrency wallets and advertisements providing trading advice.

In January, Facebook Inc said it would ban ads promoting financial products and services tied to cryptocurrencies and initial coin offerings because of the risks to users.

Google’s ban sent the price of the best-known cryptocurrency, Bitcoin, down more than 10 percent to its lowest in a month.

Trading may be affected, but not funding.

While both Google and Facebook try to protect users and their reputations with the ad ban, the funding of digital currency ventures and related technological development will unlikely grind to a halt.

“More ICOs (initial coin offerings) than before now fund through private pre-sales to crypto funds, and therefore retail sentiment is meaningful for trading, but less so for starting up,” said Lex Sokolin, an analyst for Autonomous Research, as quoted by Investor’s Business Daily.

However, Sokolin suggested sentiments can shift when big platforms like Facebook and Google say that many cryptocurrency companies were not operating in good faith. Sokolin also said cryptocurrency trading still hinges largely on “individuals’ perception of whether Bitcoin and other digital assets can survive longer-term.”

A man walks past an electric board showing exchange rates of various cryptocurrencies at Bithumb cryptocurrencies exchange in Seoul, South Korea, Jan 11, 2018. Source: Reuters

Regulators across the globe have warned consumers about the risks of investing in crypto markets, but internet companies are introducing outright bans because they worry there is not currently sufficient protection for consumers.

“If an entity such as Google does not feel comfortable with exposure to these cryptocurrencies then it is right that they don’t promote it,” said Chris Keshian, chief executive of $APEX Token Fund, which invests in cryptocurrency fund managers.

The CEO of the UK arm of Coinbase, one of the largest bitcoin exchanges, said Google’s decision was a positive development that would not dampen demand, although he viewed the ban as too widespread.

“The Google ban is perhaps too broad as it is. It should be narrowed down” to companies that pitch cryptocurrencies as investments promising a return, Zeeshan Feroz told Reuters.

Bitcoin has lost about 40 percent of its value in 2018 after rocketing more than 1,300 percent last year.

Google also said on Wednesday it would stop ads for financial products like binary options and synonymous products, contracts for difference, rolling spot forex and financial spread betting.

Companies wanting to promote those products would need to be registered with the relevant financial regulators before they could advertise again.

In a separate blog post, Google said it took down 3.2 billion ads that violated its advertising policies in 2017, nearly double the number of ads it removed in 2016.

Additional reporting by Reuters