The BEUC, the organization that brings together the main European consumer associations, along with nine of its members from eight countries (Italy, Denmark, France, Greece, Lithuania, Portugal, Slovakia, and Spain), has filed a complaint with the European Commission and national consumer protection authorities against social media platforms (Instagram, YouTube, TikTok, and Twitter) for facilitating the misleading promotion of cryptographic resources.
At the center of the protests against social media are the controversial figures of influencers, whether they are YouTubers, bloggers, TikTokers, streamers, Instagrammers, or video bloggers (vloggers), who have the ability to influence the choices of their followers, directing them towards potentially risky products.
The fact that influencers can reach a wide audience in an unprecedented way amplifies the problem, and it is no wonder that the term “crypto influencers” has been coined.
The report titled “Hype or Harm? The Great Social Media Crypto Con” . which can be translated as “Opportunity or Illusion?” aims to draw attention to this issue and hold social media platforms accountable.
Inserting misleading advertisements for cryptocurrency assets in a leisure context, whether through commercials or through the “dangerous” voices of influencers, is unfair.
The European Consumer Organization hopes for stricter advertising policies on this subject and greater collaboration between social media platforms and cryptocurrency platforms.
The Requests from the BEUC
The requests from the BEUC are as follows:
- Adoption of more rigorous advertising policies when it comes to cryptocurrencies.
- Implementation of measures to prevent influencers from misleading consumers about the nature of cryptocurrencies.
- Reporting to the European Commission on the effectiveness of the measures implemented to protect consumers from such unfair practices.
European financial supervisory authorities are asked to cooperate to ensure that platforms change their advertising policies to prevent misleading promotion of cryptocurrencies.
According to the report, there is already a legal basis for taking action at the European Union level, the Directive 2005/29/EC on unfair commercial practices, which defines them as practices that lead the average consumer to make a purchase decision that they would not have otherwise made.
There is also an organization that monitors and guides its application, namely the CPC Network, a cooperation network for consumer protection composed of national enforcement authorities. It was created to jointly address cross-border violations of consumer protection rules.
Europe vs. Influencers
The ESMA, the European Securities and Markets Authority, constantly monitors the correct application of the disclosure rules of MiFID II regarding marketing communications related to financial products. In January 2023, it initiated a common supervisory action (CSA) with the competent national authorities (NCAs) in this regard.
When announcing it, the ESMA stated that it is “aware that younger and less experienced investors are particularly vulnerable when operating online.”
That’s why the supervisory action would not overlook “marketing and advertising by companies through distribution channels including apps, websites, social media, and collaborations with affiliates such as influencers.”
In France, although these figures are relatively recent, a law has become necessary to regulate the activity of influencers in order to limit their “power” and prevent abuses.
The new regulations establish that influencers cannot promote “dangerous products or practices.” Regarding cryptocurrencies specifically, “only financial products and cryptocurrencies of those registered with the AMF can be promoted.”
Therefore, only cryptocurrency companies registered with the AMF(Autorité des marchés financiers), the country’s financial regulatory authority, can use influencers for advertising purposes. Violators can face penalties of up to 2 years in prison and a fine of 300,000 euros.
In Spain, influencers with at least 100,000 followers will have to notify the CNMV (Comisión Nacional del Mercado de Valores) at least 10 days in advance if they want to advertise cryptocurrencies. Additionally, advertising campaigns must include warnings about the financial risks associated with the advertised product.
While staying in Europe but outside the European Union, in the United Kingdom, the Financial Conduct Authority (FCA) is adopting new rules regarding the advertising promotion of cryptocurrencies to ensure that consumers are aware of the risks before investing in these assets.
Starting from October 8, 2023, those who market crypto assets must introduce a “cooling-off” period for new investors. In legal terms, it is a reflection period during which a buyer can cancel or withdraw from a contract without incurring penalties or charges.
Bonuses associated with referrals, which reward existing customers when a new customer signs up, will be prohibited.
While Europe questions the extent of what influencers can do, the U.S. Securities and Exchange Commission (SEC), the federal agency that oversees markets, warns influencers about potential legal penalties they may face for manipulating cryptocurrency prices.
The SEC has recently started cracking down on cryptocurrency influencers through fines and cease-and-desist orders. The former head of the SEC sent a clear message via Twitter, leaving no room for interpretation: “Attention all cryptocurrency promoters using social media to manipulate the price of crypto-securities: fail to heed this warning at your own peril.
Not only will you be found, but your pursuit will be like shooting fish in a barrel.”
The former SEC head emphasized that unlike other forms of fraud where the perpetrator often tries to hide their identity, influencers who advertise risky products do so blatantly and arrogantly.
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