Last year, cryptocurrencies took center stage in a big way. Having begun the year with an aggregate market cap of $17.7 billion, the combined value of all digital currencies had soared to $613 billion by the end of year. For you math-phobic people, that's a gain of more than 3,300%. It was pretty evident then, as it is now, that a substantial amount of money has found its way into the virtual currency space.

Facebook led the charge to ban cryptocurrency ads earlier this year

However, not everyone has been seeing dollar signs as cryptocurrencies have been pushed into the limelight. In late January, via a blog post, social media giant Facebook (NASDAQ:FB) announced that it would be banning all cryptocurrency-related advertisements. Said Rob Leathern, Facebook's product management director, at the time:

We've created a new policy that prohibits ads that promote financial products and services that are frequently associated with misleading or deceptive promotional practices, such as binary options, initial coin offerings and cryptocurrency.

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When announced, it was a game-changing decision, because virtual currencies were fresh off of an impressive fourth-quarter run, and advertising dollars tied to crypto appeared to be readily available for social media giants with large audiences, like Facebook. Remember, Facebook owns four of the seven most-visited social platforms on the web: Facebook, Facebook Messenger, WhatsApp, and Instagram. Losing access to potentially billions of impressions was viewed as bad news for the cryptocurrency movement. 

And Facebook wasn't alone. Not too long after its announcement to cease crypto-related ads, Alphabet, Twitter, and Snap followed suit. Overseas, Sina's Weibo and all of Tencent's social properties banned crypto ads as well.

Why virtual currency-related ads were banned in the first place

These social giants certainly couldn't be blamed for being cautious. According to a report released by initial coin offering (ICO) advisory firm Satis Group in March, 81% of ICOs with a market cap of more than $50 million turned out to be nothing more than a scam. Meanwhile, less than 4% of those ICOs proved successful. Worse yet, the Securities and Exchange Commission (SEC) has cautioned investors that it has little recourse to recover their cryptocurrency or ICO investment funds if they're stolen. 

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A separate study released by Carbon Black found that $1.1 billion worth of cryptocurrencies had been stolen by hackers through the first five-plus months of 2018. Privacy coin Monero, which obfuscates the sender and receiver of funds, as well as the amount being sent, accounted for close to half (44%) of these thefts. This is worth noting since it makes it nearly impossible for regulators to track and recover these stolen funds. 

Banning ads also made sense given how little the American public knows about cryptocurrencies. A January-released survey from cryptocurrency service platform Cobinhood found that only 56% of respondents knew that cryptocurrencies are digital decentralized currencies designed to be a medium of exchange. Even fewer (21%) knew where to buy cryptocurrency. When added to high levels of volatility and the fact that institutional investors have mostly avoided putting their money to work in cryptocurrencies (thusly leaving often-emotional retail investors in charge), ceasing ads appeared to be the right move at the time.

Facebook makes an about-face on select cryptocurrency ads

However, just five months after announcing its broad-sweeping ban on crypto ads, social media kingpin Facebook appears to be partially changing its tune.

As announced on Tuesday, June 26, Facebook is reversing its digital currency advertising ban, although there are still a few exceptions. The company's blog post notes that advertisers wanting to run crypto products on its platform will first need to submit an application that'll determine their eligibility. This application will examine any licenses they've obtained, whether they're traded on a public stock exchange, and other relevant background information, according to Facebook. ICOs will remain banned, and the company anticipates continually reviewing and updating its policy based on feedback from advertisers and its members. 

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Interestingly, this decision comes just two weeks after William Hinman, the director of the Division of Corporate Finance at the SEC, announced at the Yahoo All Markets Summit: Crypto conference that the regulatory agency doesn't view bitcoin or Ether as securities. With the SEC suggesting that both bitcoin and Ether are sufficiently decentralized so as not to need the stringent oversight usually given to securities, it moves these front-and-center cryptocurrencies a bit closer to being validated. While it's unclear if this influenced Facebook's decision, it nevertheless looks like a smart move by the social media giant to keep up with the highly fluid digital-currency space.

The questions that are now left to be answered are: 1) whether other social media companies will follow in Facebook's footsteps once again, and 2) if crypto ads will in any way be a needle-mover for Facebook, especially given that the market recently hit a seven-month low. The next few months should tell the tale.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Sean Williams has no position in any of the stocks or cryptocurrencies mentioned. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Facebook, Tencent Holdings, and Twitter, but has no position in any cryptocurrencies mentioned. The Motley Fool recommends Sina. The Motley Fool has a disclosure policy.