CRYPTO UPDATE: Is social media turning against Bitcoin?

Iona Bain

FACEBOOK has banned advertising for Bitcoin following a wave of complaints about the number of crypto-currency scams being promoted through the site.

The world’s most popular social networking site said its ban will cover all adverts for “financial products and services that are frequently associated with misleading or deceptive promotional practices”, with crypto-currencies and binary options cited as the main offenders.

The announcement came as a new survey showed that the majority of Scots – 92 per cent – will steer clear of crypto-currency this year amid fears of widespread fraud and a bubble that could burst.

The research, conducted by financial marketing firm Investoo Group, found Scots are much more likely to put money into property (43 per cent) followed by ISAs (35 per cent) and savings accounts (32 per cent) in 2018.

But Bitcoin and other digital currencies will be traded by 18 per cent of 18 to 25 year olds this year, more than any other age group.

And those young people are much more vulnerable to fake crypto-currency offers on social networking sites, according to Britain’s financial regulator.

The Financial Conduct Authority (FCA) warned that fraudsters are using glamorous photographs of jet-setters and fake reviews of their products on social media to appeal to the under 25s, who are six times more likely to trust online investment offers than the over 55s.

A recent crypto-currency promotion on Facebook featured an unauthorised photo of Virgin entrepreneur Richard Branson and encouraged users to click through to a fake news website in order to win “free Bitcoins”.

Companies only need a Facebook page and a credit card to promote posts in newsfeeds and can target users based on age, gender, profession, interests and behaviour. Facebook relies on its users to police their own newsfeeds and report any adverts they feel are suspicious.

In an update to its advertising policy, the company said it would “ramp up” enforcement of advertising rules across its platforms, including the photo-sharing site Instagram. It has already pledged to hire 3,000 new employees to deal with misleading promotions.

The ban comes despite Mark Zuckerberg, the chief executive of Facebook, recently saying he was “interested in going deeper and studying the positive and negative aspects of [crypto-currencies] and how best to use them in our services”.

It is not known how many Facebook users have been stung by fake crypto-currency offers, but Action Fraud recently revealed that the number of crimes officially linked to Bitcoin tripled last year to nearly a thousand. The typical amount lost by victims was £13,500.

Action Fraud, the country’s main fraud and cyber-crime reporting centre, also saw a spike in cases in December, when the price of one Bitcoin soared to nearly $20,000. The number of Bitcoin crimes reported at the end of 2017 was 167, compared to 41 in the same month the previous year. The true number is likely to be much higher, as many go unreported.

Mark Steward from the FCA said: “As people have become more sceptical of investment-related cold calls and consumer habits have changed, we have seen investment fraud moving online and to social media.

“While their websites and profiles appear to be professional, they are all too often run by fraudsters who fix prices and pay-outs, or in some instances don’t really place trades at all, before disappearing with innocent investors’ money.”

The FCA does not regulate crypto-currency so cannot stop misleading promotions or protect buyers in this fast-growing industry. But last month the regulator gained power over binary options investments, which allow consumers to bet on the expected value or price of a stock, commodity, currency or index.

All firms offering binary options now need to be approved by the regulator, but 94 binary options firms are still under the radar. The FCA has urged potential investors in binary options to check whether the promoter in question is on its register or warning list of firms to avoid.

In contrast to Facebook’s new strict position on crypto-currency, Twitter has thrown its weight behind Bitcoin by allowing it to be traded through its payments app.

Square, launched by Twitter co-founder Jack Dorsey, announced the new service with a cartoon named My First Bitcoin, which explains the crypto-currency to newcomers.

Mr Dorsey tweeted that he supported Bitcoin as a “long-term path towards greater financial access for all”.

Twitter could not be reached for comment.
This article first appeared in the Herald on 03/02/2017. To find out more about Bitcoin, check out Iona’s guide to crypto currency.

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