The EU moved in the right direction by passing a law requiring influencers to disclose the risks associated with crypto. More countries should follow their lead.
However, the crypto space is notoriously fickle, and the collapse of once-established companies such as Celsius and FTX are stark examples of how people can lose billions of dollars in crypto assets almost overnight.
For this reason, celebrity influencers should be thoroughly educated on a crypto product before promoting it. With so much at stake, this is a point that shouldn’t be overlooked by anyone in the industry.
Because of these huge risks, regulators are now asking questions regarding the ethics of celebrities using their considerable pull to draw people into crypto. And they’re not stopping at that; more jurisdictions are imposing stringent conditions for celebrities to pawn crypto products to the masses.
1/ Let’s review all the direct scams Bitboy has worked with in the past. Just in case you forgot here is the flyer with how much he charges.
I received this a while back by posing as a project interested in a promotion.
— ZachXBT (@zachxbt) January 3, 2022
For example, in the European Union, a new set of regulations known as MiCA laws will require crypto influencers to fully disclose the financial risks associated with the products they’re advertising.
Singapore is instituting even more stringent measures. The city-state will only allow crypto companies to advertise their products on their own platforms while completely barring influencers from promoting any crypto asset on social media.
What about tech entrepreneurs boosting crypto on social media?
While restricting or banning celebrities and social media influencers from pushing crypto might be commendable, another question remains unanswered. What should be done about billionaire entrepreneurs whose words have the power to influence the trajectory of crypto?
Twitter’s new owner, Elon Musk, is a known crypto proponent and a big Dogecoin (DOGE) fan. As an example of his massive influence in the crypto space, on Tuesday, April 25, just hours after his intention to buy Twitter became public, the memecoin’s price jumped by nearly 23% to $0.1677. That price was the highest it had been since January 14, when it traded at $0.2032.
Related: It’s time for crypto fans to stop supporting cults of personality
And that wasn’t the only time: Several of Musk’s DOGE-related posts and comments from the past year also caused the cryptocurrency’s price to either rise or fall, depending on the sentiment Musk was sharing.
Binance CEO Changpeng Zhao, better known as CZ, is another influential voice in crypto. A casual tweet from him announcing his company was creating an industry recovery fund to help ameliorate the adverse effects of FTX’s collapse caused a surge in the price of Bitcoin (BTC) and the broader crypto market. While CZ didn’t specify the projects that the fund would be propping, or when it would become active, the news still caused BTC prices to shoot to almost $17,000.
We must consider the power of such individuals as far as influencing what we buy or sell is concerned. Regulators cannot treat the likes of Musk and CZ like ordinary people. Their words hold too much weight, especially for an industry as volatile as crypto.
Some have suggested that a Twitter spat between CZ and former FTX CEO Sam Bankman-Fried could have been the spark that caused the fire that burned FTX to the ground. These people cannot use their words so frivolously, especially not on social media.
And, while CZ has since refuted the claims that he shorted the FTX token, can we trust this to be true? After all, Binance stood to gain the most from FTX’s collapse as it now becomes the biggest crypto exchange in the world.
This might come off as controversial, but there might be a case for the likes of Musk and CZ to have their activities regulated too. After all, their voices have a significant influence in the crypto space. A whimsical social media post from someone in their rarified position can create significant upheaval in the crypto market.
Sadly, such regulation might feel like an infringement on their freedoms. Therefore, the best solution, in my opinion, would be for them to exercise greater caution in their utterances. With great power comes great responsibility, and people like them should lead by example by watching what they say. It would be unfortunate if it takes regulation to make them do so.
Benefits and drawbacks of celebrity crypto promotions
We’ve seen how Kim Kardashian and Floyd Mayweather faced legal action for unlawfully promoting crypto tokens. New Yorker Ryan Huegerich sued Mayweather, accusing the boxer of misleading investors while promoting the EMax token. The Securities and Exchange Commission, meanwhile, levied a fine on Kardashian.
The biggest problem with using celebrities to advertise crypto? While they usually command huge and eager followings, their audiences, more often than not, have little, if any, knowledge of crypto. Additionally, celebrities often have no idea about the risks associated with the products they’re promoting.
Of course, the upside of celebrity influencers endorsing crypto is the inevitable buzz they create and the vast network of influence they command. Kardashian, for example, has more than 250 million followers on Instagram. Additionally, these followers are usually hard-wired to trust the opinions of celebrities, however uneducated they might sound.
Related: The SEC is bullying Kim Kardashian, and it could chill the influencer economy
But, celebrities are also prisoners of the court of public opinion. Any PR gaffe on their part could easily crash and burn a crypto project.
And did I mention how expensive celebrities can be? Reports indicate that a promotional post on Kim Kardashian’s Instagram page will set you back anywhere between $300,000 and $1 million.
Regulations will undoubtedly help to protect us against lousy crypto decisions, but our best defense is a clear eye and lots of research. Nothing beats digging up as much information as possible about a project before putting your money into it.
Crypto winter has wrought untold havoc on investments, and it’s been exacerbated by the careless actions of some major players in the industry. The fall of companies such as FTX, Voyager, 3AC, Terra, Celsius and BlockFi only strengthen calls for the regulation of crypto.
Amid the drama, the role of celebrity endorsers should not be overlooked. As an industry, we need to find ways to ethically leverage celebrities’ popularity to promote our products.
In addition to working with the laws being put in place, I think it would be best if crypto projects thoroughly educated potential celebrity advertisers on the benefits and risks of their products. This way, influencers will be better placed to give a truer picture of what they’re selling rather than just settling for a big paycheck. I believe a little honesty will go a long way in repairing crypto’s tattered reputation.
The author, who disclosed their identity to Cointelegraph, used a pseudonym for this article. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Famous people often have a tremendous influence on the attitudes we adopt and the decisions we make. For this reason, the crypto industry has increasingly leveraged such individuals to promote their products.