If you’ve spent time on social media recently, you may have seen influencers or adverts promoting crypto products and services. These include wallets, training in how to get rich, or personal advice.
Preparations underway for the implementation of the EU’s new Market in Crypto Asset Regulation (MiCA)[1] will make many of these practices illegal. But some big players that have an important role in the dissemination of information about crypto are left off the hook: social media platforms.
Crypto: a growing problem
Crypto has rapidly been gaining in popularity across the EU in recent years. 12% of consumers in the Netherlands own (or have owned) crypto assets. This figure rises to 18% in Slovenia. Despite the risks, it seems to be gaining mainstream acceptance. In the UK, fewer users regard it as gambling (38%, down from 47%) and more see it as an alternative to mainstream investments.
Above: estimated owners of crypto per EU country
But due to its high volatility and speculative nature, it remains a highly risky investment unsuitable for many consumers. Unlike traditional investments, it is not backed by tangible assets and mainly based on speculation, making it highly volatile.
For example, in early 2023, Elon Musk – owner and then CEO of Twitter, now ‘X’ – temporarily changed the platform’s logo from the tweeting bird to an innocent-looking dog. However, that dog also happened to be the logo of Dogecoin, a crypto currency.
The highly-unusual move sent the Dogecoin’s value soaring by 20% in 30 minutes, showing how volatile crypto can be.
Get rich quick with crypto!
Social media is rife with ‘get rich quick’ promises about crypto in ads and by influencers. Unfortunately, these claims are too good to be true. Consumers are at a high risk of losing a lot of money without recourse to justice. Our members (e.g., Asufin in Spain) and the European financial supervisory authorities (ESAs) have actively warned consumers about these dangers.
However, more than ever before, consumers were being exposed to the promotion of crypto and on a major scale.
A European solution required
Consumer organisations realised that consumers were at risk and decided it was time for a European response. That’s why BEUC and nine of our members filed a complaint with the European Commission and consumer authorities. It was against Twitter/X, but also Instagram, YouTube, and TikTok for facilitating the misleading promotion of crypto assets on their platforms.
Above: ‘Hype or Harm?’ That was the question posed by our coordinated action
In our view, these social media companies are responsible for allowing misleading crypto adverts to proliferate on their services. This is through advertising and ‘finfluencers’. This is an unfair commercial practice, as it exposes consumers to the loss of significant amounts of money.
Hype or harm?
Our report details some of the most egregious examples of misleading promotion of crypto on social media. We found content including promises like ‘get rich in 5 minutes!’ or ‘How crypto gaming will make you a millionaire!’ This is all in contravention of the platforms’ own advertising policies.
Our report reads like a worrying catalogue of some of the most egregious examples of the misleading promotion of crypto on social media
That is why our complaint came with a strong call to the European Consumer Protection Cooperation Network (made up of national consumer protection authorities). We asked them to require the platforms to toughen up their advertising policies on crypto and prevent influencers from misleading consumers. They should also inform the Commission about the effectiveness of measures to protect consumers against such unfair practices.
We also called on the CPC authorities to cooperate with the ESAs to ensure the platforms adapt their practices to reduce consumer exposure to the misleading promotion of crypto and related products. This requires swift and decisive action by the CPC authorities and financial regulators.
High time for social media platforms to better protect consumers
Although crypto will soon be regulated, this will not apply to social media companies. This is a gap in the regulatory framework which must be addressed by consumer law enforcement. It is these platforms that are benefiting from the advertising of speculative assets at consumers’ expense.
Now it’s up to the authorities to…protect consumers against crypto scams and false promises
That’s why it was important for BEUC to raise the alarm on behalf of consumers at risk of losing hard-earned savings. Now it’s up to the authorities in charge of protecting consumers to ensure Instagram, YouTube, TikTok and Twitter/X fulfill their duty to protect consumers against crypto scams and false promises.
This will ensure there are no loopholes in the protection of consumers when crypto is promoted and advertised on social media. This will complement the ESAs’ efforts to set up solid legal rules for crypto markets. In the meantime, remain wary if you see ads on social media promising you to ‘get rich quick’.
Find out more: Hype or Harm?
[1] By the European Securities and Markets Authority and the European Banking Authority