European authorities investigate social media platforms over misleading crypto ads
Meta Platforms’ Instagram, Alphabet’s YouTube, TikTok, and Elon Musk’s Twitter may face regulatory action as the European consumer group BEUC has lodged a complaint with the European Commission, highlighting the alleged facilitation of misleading promotions related to crypto assets on these platforms.
Protecting consumers against misleading crypto ads
According to a press release, BEUC has filed a complaint against crypto firms in Europe, emphasizing that the proliferation of deceptive advertising on social media amounts to an unfair commercial practice, posing significant risks to consumers, including substantial financial losses.
The complaint specifically targets both paid advertisements and influencer endorsements, which have become prevalent within the crypto industry.
The web3 space has witnessed increased regulatory scrutiny since the abrupt collapse of Sam Bankman-Fried’s FTX exchange last Nov., with regulators around the globe paying close attention to market participants.
In the United States, Coinbase, the nation’s largest bitcoin (BTC) trading venue is being cracked down by the SEC. Changpeng Zhao’s Binance has also been accused of wrongdoings by U.S. authorities.
Now, BEUC has taken aim at social media giants Instagram, YouTube, TikTok, and Twitter, accusing them of enabling the dissemination of misleading advertisements for crypto assets.
The organization has called upon the Consumer Protection Cooperation Network to mandate stricter advertising policies for crypto assets on these social media platforms. The aim is to safeguard consumers from falling victim to scams and false promises in the crypto space. The group also urges the Network to ensure influencers refrain from misleading consumers.
A joint effort
In conjunction with nine of its members, BEUC has requested that European consumer authorities collaborate with the European Supervisory Authorities for financial services to ensure the platforms adapt their advertising policies accordingly. By doing so, they hope to combat the misleading promotion of crypto assets on these platforms.
BEUC director general Monique Goyens stressed the need for immediate action, stating, “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.” Goyens further emphasized the importance of the authorities’ role in protecting consumers against crypto scams and false promises.
The complaint filed by BEUC has garnered support from consumer groups in Denmark, France, Greece, Italy, Lithuania, Portugal, Slovakia, and Spain. With these collective efforts, BEUC and its partners seek to hold social media platforms accountable for their role in facilitating deceptive advertising practices within the crypto industry.
The European Union has already taken significant steps in regulating cryptoassets by adopting the world’s first comprehensive set of rules, known as the Market in Crypto Assets (MiCA) regulation However, these rules do not directly address the responsibilities of social media companies in preventing misleading promotions related to crypto assets.
BEUC intends to monitor the effectiveness of the stricter advertising policies that it urges the Consumer Protection Cooperation Network to implement. The results of this monitoring will be communicated to the European Commission, the agency says.
The action taken by BEUC and the consumer groups involved represents a collective effort to bring attention to the potential risks associated with misleading advertising in the crypto space. By advocating for stricter advertising policies and holding social media platforms accountable, they aim to create a safer environment for consumers venturing into the super-volatile world of crypto.