The European Commission has received a complaint from the European Consumer Organisation (BEUC), accusing popular social media of allowing misleading promotions of cryptocurrency.
BEUC, Europe’s largest consumer rights group, highlights the unfair commercial practice on Instagram, YouTube, TikTok and Twitter as they pose potential harm to consumers, including the risk of significant financial losses. Regulatory action is now being considered to address this issue and ensure consumer protection.
“Consumers are increasingly being promised ‘get rich quick’ investments by ads and influencers on social media,” said BEUC director general Monique Goyens.
“Unfortunately, in most cases, these claims are too good to be true and consumers are at a high risk of losing a lot of money without recourse to justice.”
Details about BEUC’s report
On Thursday, BEUC published a report titled “Hype or harm? The great social media crypto con,” underlining the insufficient awareness among consumers regarding the risks associated with cryptocurrencies. The report specifically highlights the prevalence of deceptive crypto advertisements on social media platforms through advertising and influencers.
Consumer groups from Denmark, France, Greece, Italy, Lithuania, Portugal, Slovakia and Spain joined in signing the complaint.
The report emphasizes that the current legal framework, including the Unfair Commercial Practices Directive (UCPD), offers a basis for implementing EU-wide measures.
In their joint complaint, BEUC points out the Consumer Protection Cooperation Network (CPC Network) to spearhead enforcement initiatives. By coordinating actions among member states, the CPC Network can play a crucial role in ensuring consistent consumer protection standards throughout the European Union.
The report stresses the importance of the EU CPC Network, urging social media platforms to adopt stricter advertising policies. At the same time, it recommends social media platforms include a prohibition on influencers promoting crypto products in their Terms of Use.
During a press conference with reporters, Goyens talked about how crypto promotion is widely prevalent, even on primetime TV. She expressed her disapproval of notable figures like Matt Damon and Cristiano Ronaldo, who have been associated with promotions for Crypto.com and Binance.
“Crypto promotion is all over the place, you see it on primetime TV,” Goyens said, adding that “online platforms have a duty and an obligation of professional diligence” to combat unfair commercial practices.
These social media platforms should be required to submit regular reports to the European Commission as well, the document says. With these reports, the European Commission can evaluate the measures’ effectiveness.
Monitoring crypto advertising on social media
The complaint from BEUC comes as the U.S. Securities and Exchange Commission (SEC) is cracking down on the crypto industry in the country. The financial watchdog filed lawsuits against the two largest exchanges in the country, Coinbase and Binance, for securities law violations.
These regulatory actions and the FTX collapse have sparked concerns about consumer protection in the realm of cryptocurrencies such as Bitcoin and Ether.
In response to these concerns, the European Union adopted the world’s first comprehensive regulations for overseeing crypto assets — Markets in Crypto Assets Regulation (MiCA).
The MiCA will mandate crypto providers to obtain a license to advertise throughout the European bloc. Meanwhile, the Digital Services Act will introduce additional restrictions on major online platforms. These regulations will create a framework that promotes transparency, enhance security and safeguard consumers in the crypto industry.
“Crypto will be regulated soon with the new Market in Crypto Assets Regulation but this legislation does not apply to the social media companies benefiting from the advertising of crypto at the expense of consumers,” said Goyens.
According to Goyens, online platforms must adhere to professional diligence per EU regulations to combat unfair commerce. However, she finds that certain networks are violating their own advertising policies.
Consumer authorities at the national level can impose fines on those violating consumer laws, but Goyens talked about stronger sanctions. Last year, TikTok began adhering to the EU strictures after BEUC complained of hidden marketing and intrusive advertisements aimed at children.
One country that has acted on the concerns regarding social media and influencers is France, which has recently enacted legislation to oversee influencers who endorse products and services on social media. Under the new law, crypto promotions are only permitted for registered crypto companies. This way, these influencers would only be able to promote crypto assets with supervision from lawmakers.
More challenges for the crypto sector
The U.S. and the EU are not the only ones tightening their grip on the crypto industry for consumer security reasons. The U.K.’s Financial Conduct Authority (FCA) will introduce stricter rules for crypto marketing regulation.
The new rules require crypto firms to verify individuals’ knowledge and experience before investing in crypto. Promoters of crypto assets must also implement clear risk warnings, and their advertisements must be transparent, fair and free from misleading information.
Similar to the regulation introduced by the FCA last year, these new rules aim to address misleading financial advertisements of high-risk investments.
Australia recently jumped aboard the crackdown train as well. The Commonwealth Bank of Australia (CBA), the largest bank in Australia, aims to impose a monthly payment limit of AUD10,000 ($6,663) on digital asset trading platforms. The bank also plans to implement a 24-hour hold or potential rejection on “certain payments to cryptocurrency exchanges.”
These measures are part of its efforts to combat crypto scams through stricter regulations. According to Cointelegraph, there is still no further information on what type of payment it would block or hold.
James Roberts, the general manager of CBA’s fraud management services, highlighted that “scammers globally are capitalizing” on the rising interest in crypto. Many scammers deceive individuals with false investment opportunities or divert funds to crypto exchanges. These measures would be “subject to ongoing review” moving forward.
The news is a major surprise from the bank, as over a year and a half ago, in November 2021, CBA was going to launch crypto trading services for its users. However, in May 2022, the CEO of CBA, Matt Comyn, faced regulatory challenges regarding the product launch. The country’s financial regulators eventually won, resulting in the postponement of the pilot for the crypto-trading product.
