A quick 3min read about today's crypto news!
Mark Taylor is the Head of Financial Crime at the CEX.IO crypto exchange.___
In the past few months, influencers and celebrities have been increasingly promoting crypto projects. While many work with prominent businesses, it’s not uncommon to see paid posts from well-known individuals advertising questionable digital asset services.
A great example is US celebrity star Kim Kardashian who sparked quite some controversy in June when she promoted the Ethereum Max crypto project to her more than 250 million followers on Instagram.
Consequently, in a recent speech, the UK Financial Conduct Authority (FCA) chair Charles Randell argued that Kardashian's post was potentially the "financial promotion with the single biggest audience reach in history" while warning consumers about the growing risks of influencer ads within the crypto industry.
At the same time, Randell called for urgent action to regulate the advertisement of crypto projects with a major focus on social media ads and influencer promotions to eliminate fraudulent activity and protect investors.
From our point of view, as crypto industry players at CEX.IO, it makes perfect sense for the FCA to scrutinize influencers on social media. Professional traders might not pay much attention to celebrities' statements other than for their sentimental value. Consumers, on the other hand, can definitely feel compelled to follow the advice in such promotions. And it is the FCA's role to protect the consumer.
Given how much time people spend on social media, it often becomes a source of truth for personal finance decision-making.
And, when somebody with a devoted following base promotes a digital asset or a strategy, even an ad disclosure (like in Kim's case) may not be enough to make people think about risks critically.
For that reason, it is reasonable for the FCA to take a strong stance in wishing (or demanding) more transparency within the crypto industry. That means celebrities, who take advertising deals, need to look beyond monetary compensation, evaluating their involvement in promotions. On the other hand, crypto projects, who wish to leverage the benefits of social media, need to understand the line between advertising and deception. More so, an educated consumer is also an empowered consumer who can question what's on the screen, even if it comes from a favorite character.
And it should be clear for anyone who has spent at least a few weeks within the industry that digital assets have a rather steep learning curve as the underlying technology and concepts are rather complex (just think about explaining yield farming to someone unfamiliar with crypto). In addition to this, there's great money involved within the space, which consumers can easily lose if they are not careful enough.
For these reasons, it's crucial to highlight the risks of crypto investments, crack down on dubious marketing messages and ads, and be open and transparent with consumers.
This has been exactly the case with loans and investments in the financial sector, where one small misunderstanding (or communications trick from the service provider's side) can cause heavy losses for a consumer. As a result, these have been at the center of focus for the FCA and other regulatory bodies all over the world to promote clarity and transparency concerning a loan's APR (annual percentage rate) or an investment's potential risk. And this is what should be done with crypto as well.
Eventually, with effective communication and a consumer-friendly approach in terms of advertising, we can provide all the relevant and factual information to consumers that allow them to make the right choices when it comes to their money. And sending a message to these three parties - celebrities, crypto projects, and consumers - is what the FCA is doing. I think this is where true industry leaders can work alongside regulators to spread awareness and educate consumers.
While being completely clear and honest might scare away some, it won't have much impact on those consumers who are looking to join the crypto industry. On the contrary, people will get more familiar with the technology and how things work, which will allow them to make informed choices. And, to be perfectly honest, it's not a viable strategy for a reputable business to attract consumers with deception or by holding back the truth.
In the end, honesty and transparency are what wins out. And all of us in the industry should earn our customers' trust by being straight with them.___Learn more: - Another Altcoin Scam Teaches Inexperienced Investors & Influencers a Lesson- Celebrity Endorsement Weighs Heavily for US Crypto Investors – Survey- FinTok & 'Finfluencers' Are On The Rise: 3 Tips To Assess Their Advice