BEUC Calls for Action: Crypto Advertising Deceives Users
The European Consumer Organisation, or BEUC, has published a report on false crypto advertising across social media platforms, alerting European consumer protection entities.
BEUC suggests that a large number of people investing in cryptocurrency are riding the global trend (heightened interest) without fully comprehending the potential risks involved: extreme volatility, speculative nature, and a rise in scams leading to financial losses. Misleading advertising across social media platforms and endorsements made by popular figures only serve to heighten users' investment fervor, despite the sharp plunge in the value of digital assets over the past year (more than 70%).
One stark example occurred in April 2023, when Elon Musk swapped his official Twitter logo for a Dogecoin emblem. This whimsical decision by the billionaire triggered significant market activity, pumping the token's price by 30% within hours. This situation showcased a flagrant violation with a strong impact on users' opinions.
However, such events cause less harm than the widespread promotion of fraudulent projects. This happens primarily because many corporate internal regulations fall short of consumer protection standards, and moderation is often lackluster. For instance, while several platforms distinguish between educational and commercial promotional content, they turn a blind eye to potential risks. Others are wide open for all sorts of promotion, a stance completely unacceptable to regulators.
Of course, some companies, keen to evade confrontations with governmental bodies, go the extra mile and outright ban cryptocurrency marketing. However, a thorough review of their content reveals that such an approach doesn’t yield practical results, especially concerning crypto influencers who persistently promote digital assets while promising users substantial returns.
A flurry of celebrities and so-called crypto influencers are promoting these assets, including on YouTube channels. Some have tens of thousands of followers. Some are marketed with promises that seem too good to be true, and probably are, such as returns above 10% per annum,notes Verena Ross, Chair of the European Securities and Markets Authority (ESMA).
Against a backdrop of increasing financial losses by users who have believed fraudulent information or crypto influencers, many European countries have decided to tackle this issue head-on. They've launched educational initiatives aimed at enlightening the public about the risks inherent in cryptocurrency investments. While BEUC is in favor of these efforts, it insists that the onus is on the companies. The organization is calling for a united front in the form of a policy to oversee the regulation of crypto asset advertisements, urging for the imposition of more stringent conditions.
