Topline
An influential consumer group on Thursday savaged TikTok, Twitter, YouTube and Instagram over the proliferation of misleading crypto ads on social platforms in a complaint to consumer authorities and the European Commission, raising the prospect of regulatory action in the bloc amid growing international pressure to clamp down on the industry and protect consumers.
BEUC complained to the European Commission over misleading crypto ads on social media.
Key Facts
The European Consumer Organization, BEUC, filed a complaint with the European Commission and consumer authorities for “allowing misleading advertisements of crypto assets to multiply on their platforms.”
Crypto investments are highly volatile and speculative, exposing consumers to serious harms including scams and the possibility of losing large sums of money, the complaint said, which was jointly filed with nine of the group’s member organizations.
Despite the well-documented risks and increasing hype around investing in crypto, the complaint said few consumers are fully aware of the risks they are taking and that advertisers and influencers promoting crypto products on the platforms are not clearly disclosing them.
“Consumers are increasingly being promised ‘get rich quick’ investments by ads and influencers on social media,” said BEUC Director General Monique Goyen, many of which turn out to be “too good to be true” and put consumers at risk of losing a lot of money with no recourse.
BEUC urged Europe’s Consumer Protection Cooperation Network, a coalition of national regulators working together at the EU level, to impose stricter policies on platforms for crypto ads and take steps to prevent “influencers from misleading consumers as to the nature of crypto.”
The group also urged European consumer authorities to work with financial watchdogs to prevent the misleading promotion of crypto.
What To Watch For
Regulators, either at the EU or national level, could act on the complaint against the social platforms and potentially pursue regulatory action to sanction companies or push them to change practices. It’s unclear whether they will choose to do so or on what time scale that might happen if they do.
Tangent
BEUC also asked the network of European consumer authorities to evaluate how effective the measures they have in place already protect consumers against unfair practices like misleading crypto ads. The European Commission is one of the three central institutions of the EU and a powerful driving force for new legislation and regulation of international consequence. Though the bloc has recently approved the world’s first comprehensive set of crypto rules—which become law in 2024—Goyens said the legislation “does not apply to the social media companies benefitting from the advertising of crypto at the expense of consumers,” leaving a potential space for future regulation.
News Peg
While cryptocurrencies are not particularly new, interest in them has exploded in recent years. Many areas of the market fit uneasily in, or outside of, existing rules leaving the lawmakers and regulators who failed or declined to match pace with the sector scrambling to catch up. Unpredictable and volatile markets, theft, scams and misinformation and deceptive advertising have all grown alongside interest. Celebrities and high profile figures, including Kim Kardashian, Lindsay Lohan and Jake Paul, further fuel the hype and tout crypto tokens to followers, which regulators say may be illegal. The collapse of key institutions, such as Sam Bankman-Fried’s FTX, and allegations of widespread misconduct from Binance has highlighted the lack of enforcement and signaled the starting gun for enforcers taking the industry seriously.
Further Reading
Hype or harm? The great social media crypto con (BEUC)
The Untold Story Behind Emax, The Cryptocurrency Kim Kardashian Got Busted For Hyping (Forbes)
Source: https://www.forbes.com/sites/roberthart/2023/06/08/twitter-tiktok-instagram-and-youtube-criticized-by-consumer-group-over-misleading-crypto-ads/