A certain pet-themed cryptocurrency that needs no extra publicity from me says it’s back marketing its digital wares on London’s public transport system. Only this time, its advertisements bear the paw-prints of regulators. After an initial campaign was banned for dangling mega-gains to investors, it now touts itself as a source of “ecosystems” and “crypto education.”
The small print reminds passengers that crypto is unregulated and can go down as well as up – not exactly the stuff of Mad Men. But it’s symbolic of a hype-driven sector that’s been chastened by the first snowflakes of a crypto winter, with a boom in pandemic speculation giving way to plunging prices, job cuts and regulatory crackdowns.
In the racier world of social media, though, things are a bit different. “Crypto Twitter,” which Elon Musk looks set to become responsible for, shows no such restraint — and, along with other platforms, has long been a magnet for hype, dodgy research tips and very real scams. More than 95,000 people reported a cumulative $770 million in losses to fraud initiated on social media in 2021, according to the Federal Trade Commission.
Musk himself has promised to drain the network’s swamp of scams, spams and bots — a worthy goal, but a contradictory one, given they thrive in the same frictionless hive of communication that makes Twitter Inc.’s money. Musk also seems to want to hitch Twitter’s wagon closer to the crypto train, tweeting ideas such as overhauling its subscription non-fungible tokens service and accepting Dogecoin payments. Most crypto ads are officially restricted on Twitter and require prior approval, though promoters have found other ways to get the word out.
Given the winds of regulatory change are blowing harder these days, it might be an ideal time for Musk to deliver on his promised clean-up. He likes to promote himself as a champion of free speech, and maybe plans to emulate the success of Asian social media in generating profits from digital tokens. But if fraud keeps growing there’s every chance consumer-protection watchdogs will start knocking on online doors.
Some of this is already happening. The U.K. government recently pledged to make top social-media platforms responsible for fighting fraudulent ads on their services, and also wants to crack down on ads that contain so-called cryptojacking malware that mines crypto without permission.
And the European Central Bank’s Fabio Panetta, in a withering speech this week laying out the case for a comprehensive tightening of crypto regulation, blasted social media for exacerbating the Fear Of Missing Out among newcomers to the trading game while underplaying the associated risks. More than half of under-40s are incentivized to make a high-risk investment because of this, according to the U.K. Financial Conduct Authority.
Without changes, Twitter is in danger of becoming synonymous with more than just free speech. It has become part of a crypto market that relies on word of mouth to keep bringing in new users to justify inflated prices. When Sam Bankman-Fried, boss of crypto exchange FTX, recently described an imaginary yield-farming crypto project as growing in value through financial-engineering “magic” and word of mouth, he invoked the gang that hangs around the Twitter water cooler as key participants in boosting virtual values.
Twitter has taken over whatever role the shoe-shiner’s stock tip used to play. This may come back to haunt it. Co-founder and Bitcoiner Jack Dorsey in October tweeted about looming “hyperinflation.” inflation rates have risen since then but Bitcoin has been a terrible hedge, falling more than 40%.
To be sure, Musk is unlikely to suddenly turn his back on the speculative megaphone that calls to crypto trolls, evangelists and newbies alike. After all, if he is so often a target of mimicry by scammers, it’s because he’s a troll himself. He used Twitter to announce both Tesla’s plan to accept payments in Bitcoin and its later U-turn on the policy. His dabbling in Dogecoin unleashed his memestock and memecoin potential.
But if Twitter is going to monetize its network through ways other than ads, making it a less dangerous place for people’s wallets would be a start. Pet-themed crypto promotion should be tamed everywhere — online, as well as on London buses. –Bloomberg