The Rise of Social Media Influencers promoting Cryptocurrency
As the number of social media influencers rises so has the number of brands targeting influencers to advertise their products.
The FCA recently announced that it would be taking urgent action to protect consumers from making risky crypto investments advertised through social media as a way of doubling, tripling, or quadrupling their income.
Not only are social media influencers using their personal brand to market well-known luxury brands they are also encouraging followers to invest in certain products that potentially carry a lot of risks.
Kim Kardashian for example is the latest influencer who took to Instagram as part of a paid advertising post that urged her followers to look into cryptocurrencies as an investment.
She did disclose that her post was an advertisement however, this sort of advertisement does not set out the pitfalls of investing in cryptocurrency putting the investor at risk of consumer harm. Social media being the most used form of advertisement is so effective because followers (mostly young people) trust the influencer and buy into their lifestyle.
The FCA’s concern is that investors believe they are offered regulatory protection. Additionally, investing via social media does not allow for proper due diligence to be carried out to verify who the money is being paid to or give the investor professional tailored advice.
The cryptocurrency provider, Binance, is the most recent example of the FCA’s concerns with this market. It is not an FCA supervised provider because it failed to answer basic questions posed by the FCA.
Cryptocurrency is a market that is under scrutiny and is an unregulated market. The regulatory landscape is changing on a global scale and social media and other online platforms are likely to see the introduction or tightening of regulation to address the risks posed.