As general cryptocurrency awareness has exploded over the past two years, the prominence of crypto-based financial influencers, or “finfluencers,” has also exploded. Lawmakers around the world – including Australia, which anticipates a boom in the crypto industry over the next decade – are debating whether this counts as financial advice requiring regulation or the collective free speech of a public deprived of its rights.
From the outside, it may be easy to dismiss finfluencers as catering to a relatively small group of people, but the reality is that TikTok hashtags like #crypto and #cryptocurrency have amassed billions of views. Ben Armstrong’s YouTube channel, BitBoy Crypto, has 1.44 million subscribers, with each of his videos frequently viewed over 100,000 times. A video titled “Top 3 Altcoins to Buy NOW!” has over 650,000 views.
“On my channel, we want to be the people’s champion,” Armstrong said in a statement to Forkast. “Crypto and digital assets are a way forward, a way out of the broken systems that are preventing millions of people from finding financial stability. It’s my job to bring the most up-to-date information and education and more relevant to my audience.
Social media is in some ways a good way to spread information about crypto. It meets people where they are, providing financial education that was once the preserve of colleges and universities. By delivering nuggets like “what are derivatives” in 30-second videos on people’s phones, finfluencers are overturning what one expert has called the walled garden of financial institutions. For this reason, Trent Barnes, director of ZeroCap, warned that overly restrictive regulation will disproportionately affect financially disenfranchised people.
“Regulators are there to potentially protect people, right? But what they’ve basically done is prevented them from being able to create the kind of wealth that the rich are able to create,” Barnes said. “Now with crypto, they’re coming to Wall Street, however, they don’t necessarily have the education or the resources or the tools to be able to do that.”
Unfortunately, some influencers do not act in good faith. The amount of money lost to scams increased by 82% in 2021, to nearly US$8 billion in cryptocurrency, according to a report by Chainalysis. Nearly $3 billion of that comes from raffles alone — a type of scam where developers create a cryptocurrency, build hype around the crypto — often via social media — to attract investors. After a buying spree inflates the price of the crypto, the creators of the crypto suddenly sell off their own holdings, causing prices to plummet, leaving investors with crypto that is no longer worth anything.
A recent high-profile rug draw of a project based on the popular “Squid Game” series saw the token’s price plummet from US$2,861 to zero overnight, as the developers abandoned the project after a huge social media hype, especially on Twitter, had sent its value skyrocketing.
The Australian Securities and Investments Commission recently reiterated that any unlicensed party providing financial advice is in breach of the Companies Act 2001, which carries significant penalties.
“Anyone providing advice or research – formal, informal, personalized or otherwise – should be aware that they fall fully within the financial services licensing requirements if the subject matter of such advice falls within the local regime,” Urszula said. McCormack, a financial regulator. attorney at King & Wood Mallesons, in a statement to Forkast.
Australian Senator Andrew Bragg has recently been outspoken about the need for better regulation in this space, suggesting giving more impetus to the platforms themselves.
“There’s a lot more we can do to rein in the social media giants,” Bragg said at an influencer conference in Australia last month on how best to regulate unlicensed online financial advice. “What happens online should reflect what happens in the real world, in law and in practice.”