In a recent consultation report by the International Organization of Securities Commissions (IOSCO), measures were outlined to combat the rising risk of “finfluencers” influencing retail investors through social media.
According to the report, these self-appointed financial experts have been influencing the investment decisions of retail investors, particularly the younger generation.
As a response to this report, several prominent figures and entities in the crypto space have launched a coordinated campaign against misguided finfluencers, calling for a comprehensive regulatory framework to address the issue. IOTA is the latest to release a statement supporting this campaign.
IOTA acknowledges the important role that financial influencers play in the crypto space through education and information. However, the lack of regulatory framework exposes retail investors to conflicts of interest, misinformation, and market manipulation.
In order to effectively regulate and control the operations of finfluencers, IOTA proposes that the IOSCO clearly define finfluencers based on their activities and intent. The focus should be on those who promote financial products, whether they are paid or unpaid. Additionally, the various content formats used by these individuals, including group chats, social media posts, and livestreams, should be taken into account.
By capturing the promotional intent rather than just compensation, regulators can ensure that all influential financial content is subject to appropriate rules.
IOTA’s Recommendations
According to IOTA, authorities should strengthen oversight and accountability through cross-border cooperation. Investor education is also highlighted as a way to mitigate the risks associated with finfluencers. Finfluencers are encouraged to pursue optional certificate programs to promote responsible financial communication, while retail investors should be taught how to evaluate financial content.
To enhance good practices, IOTA recommends collaborating with social media platforms to enforce financial disclosure policies, using AI-driven monitoring to detect financial misinformation, encouraging financial institutions to conduct thorough research before engaging with finfluencers, and establishing a global database of compliant and non-compliant experts.
For retail investors, IOTA suggests equipping them with tools to guide their investment decisions, as they often explore different investment products. This includes diversifying information sources, cross-checking financial claims, and avoiding emotionally driven investment decisions influenced by finfluencer hype. It is also important for investors to know how to report misleading or fraudulent content to regulators and platforms.
Meanwhile, the UK’s Financial Conduct Authority (FCA) has flagged 1,702 illegal crypto ads this year to clean up the ecosystem. Similarly, regulators in New York have proposed a bill to combat rug pulls and crypto scams.
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