Alice Taylor
The EU has set a commendable example by passing a law that mandates influencers to disclose any potential risks related to cryptocurrency. Other nations would be wise to take a cue from this decision.
The crypto space is known to be unstable, and the collapse of previously reliable companies such as Celsius and FTX illustrate how millions of dollars worth of crypto resources can be wiped out in a blink of an eye.
Given the potential risks, celebrity influencers must be well-informed about a crypto product before promoting it. It is essential that no one in the industry overlooks this critical aspect.
Due to the significant dangers of investing in cryptocurrency, regulators have raised questions about the ethics of celebrities leveraging their fame to promote cryptocurrency to the public. To further protect consumers, more jurisdictions are now establishing strict rules limiting celebrities from peddling crypto products.
In the European Union, MiCA laws stipulate that crypto influencers must clearly reveal any financial risks connected with the products they are promoting.
Singapore is now imposing even stronger restrictions. All crypto businesses will be only given permission to promote their products through their own platforms, and influencers are completely forbidden to advertise any crypto asset on social media.
What about tech entrepreneurs boosting crypto on social media?
While it may be admirable to restrict or prohibit celebrities and social media influencers from promoting cryptocurrency, the unanswered question remains: what action should be taken regarding billionaire entrepreneurs whose statements have the potential to shape the future of cryptocurrency?
On Tuesday, April 25, Elon Musk's announcement that he was the new owner of Twitter caused Dogecoin's price to surge by almost 23%, pushing it to $0.1677, the highest since January 14, when it traded at $0.2032. As a known cryptocurrency advocate, Musk's impact in the crypto space was evident.
Moreover, several of Elon Musk's posts and comments related to DOGE during the last year have caused the price of the cryptocurrency to either go up or down depending on the opinion Musk gave.
When Binance CEO Changpeng Zhao, more commonly known as CZ, casually tweeted that the company was creating an industry recovery fund to counter the aftermath of FTX’s collapse, it caused a major increase in the price of Bitcoin and other cryptocurrencies. Although CZ did not give specifics on what the fund would be used to support, or when it would launch, it still caused Bitcoin's value to reach nearly $17,000.
We need to take into account the considerable clout of figures like Musk and CZ when it comes to affecting what we purchase or sell. Regulators should not treat them in the same way as other individuals, due to the considerable impact their statements have, especially in a sector as unstable as cryptocurrency.
It has been speculated that the Twitter argument between CZ and the ex-FTX CEO Sam Bankman-Fried may be linked to the downfall of FTX. These people should be more careful with their words, especially on social media.
Despite CZ's denial of having shorted the FTX Token, can his words be taken at face value? After all, Binance had a vested interest in seeing the downfall of FTX, as it allowed them to become the top crypto exchange worldwide.
Although it may be considered controversial, there could be an argument for regulation of the activities of high-profile figures such as Elon Musk and CZ in the crypto space. Given their influential standing, just one seemingly minor tweet or post from them can have a considerable impact on the cryptocurrency markets.
It would be unfortunate if stricter regulations have to be put in place to restrict certain behaviors, as it might feel like it's taking away certain freedoms. However, those with great power should lead by example and exercise caution when expressing their opinions. After all, with great power comes great responsibility.
The Advantages and Disadvantages of Using Celebrities to Promote Cryptocurrencies
Kim Kardashian and Floyd Mayweather have both been subject to legal action due to their involvement in the illicit promotion of crypto tokens. Ryan Huegerich, a New Yorker, sued Mayweather claiming he misled investors while publicizing the EMax token. Additionally, the Securities and Exchange Commission imposed a penalty on Kardashian.
The biggest downside to using celebrities to endorse crypto is that a lot of their followers lack knowledge of the crypto industry and are unaware of the risks involved. Furthermore, the famous people being hired to advertise may also not understand the potential dangers that come with their message.
The great benefit of having celebrity influencers promote crypto is that it leads to hype around the industry and access to a wide range of audiences. As an example, someone like Kardashian has over 250 million followers on Instagram. These people have been conditioned to trust the words of celebrities, even if they appear to not know much on the subject.
However, because of the judgement of the public, celebrities are also limited in their actions. Any mis-step in their public relations strategies could result in the demise of a crypto project.
And did I mention how expensive celebrities can be? It has been reported that a sponsored post on Kim Kardashian's Instagram page costs between an estimated $300,000 to a whopping $1 million.
Our best defense against making bad decisions in the crypto market is to do thorough research and come to it with a clear perspective. Even though regulations will likely be put in place to protect us, no measure will compare with the knowledge that can be gained by getting to know a project inside and out before investing in it.
The devastating effects of crypto winter have been further aggravated by the irresponsible behavior of some leading actors in the sector. Recent downfall of prominent organizations like FTX, Voyager, 3AC, Terra, Celsius, and BlockFi are strengthening the need for legal regulation of the crypto market.
The importance of celebrity endorsers in times of drama should not be overlooked, and the industry must develop ethical methods of capitalizing on the popularity of such stars to promote products.
The reputation of cryptocurrency can be restored if crypto projects take the initiative to fully inform influencers and potential celebrity advertisers of the advantages and dangers of their products. This way, they will be able to accurately portray the things they are promoting and not just be enticed by a big salary. Honesty is key here.