Cryptocurrencies are considered a potential supplement in the financial and payment settlement system. It is Substantial research and concluded that cryptocurrencies have numerous benefits such as it prominently protecting against inflation, it has a high transactional speed, promoting cost-effective transactions, establishing a decentralized system, providing accessibility, considered safe and secure and providing privacy.
Countries across the globe are extensively assessing and evaluating the use, avenue and scope of cryptocurrencies and drafting laws for regulation and jurisdiction. Recently, the European Union passed new legislation with a thumping majority to legalize cryptocurrency transfers and other related aspects. Also, Israel is working on detailing and extending the process of cryptocurrencies and other digital assets.
But it is crucial to note that some risks and issues are categorically associated with it, which are considered as a major impediment in the process. The risks include user issues, lack of regulatory norms and legislative process. Further, there are counterparty risks and management risks associated with it as well. Market regulation and lack of sovereign backing make cryptocurrencies too volatile. Most importantly, it is reported that cryptocurrencies are prone to illegal activities such as gambling, terror financing and money laundering.
The rising risks are recently highlighted by an influential consumer group that attacked distinguished social media platforms such as TikTok, Twitter, YouTube and Instagram over penetration of misleading crypto ads on social media platforms. It is reported on numerous instances that these assets lead to gambling, fraud and extortion.
In response, the European Consumer Organization, BEUC and its nine members including Denmark, France, Greece, Italy, Lithuania, Portugal, Slovakia and Spain filed a complaint with the European Commission and consumer authorities against the above social media platform facilitating the misleading promotion of crypto assets.
As earlier reported by BEUC in one of the research papers it was quoted that due to their high volatility and speculative nature, crypto investment products are highly risky for consumers. Unlike traditional investment products, they are not backed by tangible assets and are mainly based on investor speculation. This makes them highly vulnerable to contexts and their value may drop within short periods as this was the case recently. It is also well-documented that crypto may trigger scams and unfair commercial practices, eventually resulting in heavy financial losses for consumers.
The complaint underlined that these above-mentioned social media giants are responsible for allowing misleading advertisements of crypto assets to multiply on their platforms, through advertising and influencers. The complaint also highlighted the risk associated with the loss of a significant amount of money.
The organization drafted a list of guidelines for the Consumer Protection Cooperation Network to request that social media platforms have stricter advertising policies, it also requested the adoption of measures to prevent influencers from misleading consumers, to inform the European Commission about the effectiveness of the measures put in place to protect consumers against such unfair practices.
In addition, European consumer authorities should also cooperate with European Supervisory Authorities for financial services to ensure the platforms adapt their advertising policies to prevent the misleading promotion of crypto. BEUC Director General Monique Goyens said that Consumers are increasingly being promised ‘get rich quick’ investments by ads and influencers on social media. 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.
He further added that 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. This is why we are turning to the authorities in charge of protecting consumers to ensure Instagram, YouTube, TikTok and Twitter fulfill their duty to protect consumers against crypto scams and false promises.
Importantly, Crypto has rapidly been gaining in popularity across the EU in recent years, with 12% of consumers in the Netherlands owning crypto assets, this figure rises to 18% in Slovenia. Despite the risks, crypto assets seem to be gaining mainstream acceptance, in the UK, fewer crypto users regard them as a gamble and more see them as an alternative to mainstream investments. Thus, it is crucial to eliminate the risks and issues associated.