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Asia-Pacific regulators scrutinise the role of “finfluencers”

By Paul Golden

Edited by Aaron Woolner


Updated

Vlogger streaming a live video live at a train platform
Vlogger streaming a live video live at a train platform - Photo: Shutterstock

American teenager Charli D'Amelio has achieved worldwide fame accruing the most followers on ByteDance’s app sensation TikTok, at 128 million and counting, but others are using social media to show-off more than their dance skills. 

The world of cryptocurrencies has provided a different route to social media fame, and an ugly portmanteau: finfluencers. As with many popular trends the rise of the finfluencers started in the US. Los Angeles based CryptoWendyO, has nearly 200,00 followers for her take on cryptocurrency, decentralised finance and non-fungible tokens, but the trend is also now being seen in Asia-Pacific. 

Sydney-based Queenie Tan has 20,000 followers for her Instagram account, investwithqueenie, where she gives investment ideas that she says will enable people to generate $1000 a month in passive income.

Claims like this are attracting the attention of financial regulators like the Australian Securities and Investments Commission (ASIC). Following an enquiry from Capital.com an ASIC spokesperson confirmed that it was undertaking a review of selected finfluencers to understand how financial services law applies to this activity and was also reviewing licensees who engage finfluencers to promote their products and services.

ASIC unhappy about “unlicenced advice”

“Our findings so far indicate that most finfluencers do not hold an AFS (Australian financial services) licence nor are they representatives of an AFS licensee,” says the ASIC spokesperson, adding that a number of finfluencers may be operating as businesses based on the systems and remuneration models being used.

Although a key part of its work will be to educate finfluencers to consider whether they need a licence or authorisation from an AFS licence holder, ASIC says it will take action where it sees individuals offering unlicensed advice.

ASIC is not the only regulator in Asia-Pacific that is looking at the finfluencer trend. The Hong Kong Financial Services and the Treasury Bureau has proposed that only individuals licenced and regulated by the Securities and Futures Commission for the purpose of conducting regulated virtual asset activity should be allowed to market virtual assets or services associated with a virtual asset exchange.

“This is to prevent local investors from being exposed to risks from unlicensed virtual asset exchanges,” a bureau spokesperson told Capital.com.

Singapore says influencers must issue disclaimers 

The Monetary Authority of Singapore (MAS) is also looking at the issue. In response to an enquiry from Capital.com, it says social media influencers who offer financial advice must comply with the same disclosure requirements as regulated firms or risk being placed on its investor alert list. 

The MAS says that while third parties - including social media influencers - may solicit customers in Singapore on behalf of providers of regulated payment services such as digital payment tokens (DPTs), this must be done within the existing rulebook. 

“However, such third parties must comply with the same disclosure requirements as regulated entities, including issuing warnings to consumers to alert them to the risks of trading DPTs, such as possibly losing all their money or tokens,” an MAS spokesperson told Capital.com.

The spokesperson went on to say that unlicenced entities that solicit customers in Singapore may be placed on the MAS investor alert list and investigated for breaches of the Payment Services Act.

New Zealand issues guide 

In June, New Zealand’s Financial Markets Authority (FMA) issued a guide that made similar observations, warning that since March, anyone who gives regulated financial advice to retail clients (such as recommending specific products) in that country must either hold or operate under a financial advice provider licence.

In the same month, Thailand’s Securities and Exchange Commission prohibited exchanges from providing services related to fan tokens “tokenised by the fame of influencers”.

Why do exchanges use finfluencers?

With so many people claiming to be influencers it can be difficult to know where to start when assessing the impact of this phenomenon. Crowdsense (a platform that tracks social media sentiment towards cryptocurrencies, such as when influencers are talking about specific coins) measures influence based in several ways. 

This includes not just the number of followers, but also the number of posts and replies relating to cryptocurrency and the level of engagement from the crypto community with the individual’s past posts and replies.

So why do crypto companies use influencers to promote digital currencies? A spokesperson for Binance says influencers usually have a specific audience - from miners to day traders – and that the exchange works with them to show products from different angles and to ask for opinions based on facts.

Finfluencers provide “honest feedback”

“Influencers sometimes have different opinions and we are cultivating an equal playing field with honest feedback,” she says. “In addition, influencers can openly show their trading strategies and share predictions, which is something we will never do.”

Angel Zhong senior lecturer in finance at RMIT School of Economics in Melbourne and a trading trends expertAngel Zhong senior lecturer in finance at RMIT School of Economics in Melbourne and a trading trends expert - Photo: RMIT

Angel Zhong suggests that the appeal of finfluencers lies in their ability to overcome investor scepticism about cryptocurrencies. Zhong is a senior lecturer in finance at RMIT School of Economics in Melbourne and a trading trends expert.

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“They explain complicated investment concepts in a simple way and their presence on social media platforms cater to the new generation of investors who are heavy users of these platforms,” she says.

Crypto growth dependent on “hype and sentiment”

Crowdsense CEO and co-founder, Eliaz Tobias, says that the crypto market has fewer fundamentals than other markets and therefore much of the growth potential is dependent on social hype and sentiment.

Crowdsense CEO and co-founder, Eliaz TobiasCrowdsense CEO and co-founder, Eliaz Tobias - Photo: Crowdsense

“When Elon Musk tweeted about Tesla accepting Bitcoin and when Mark Cuban bought Polygon, both of these coins skyrocketed in price,” he says. “This is the reason why the holy grail of crypto companies is to get endorsement from influencers.”

Platforms such as TikTok and YouTube have removed content that promotes crypto trading, which some finfluencers have described as unfair to content producers who are offering advice on investment strategies rather than promoting specific cryptocurrencies.

Tobias suggests these actions were taken to protect viewers from fake news and misleading information, acknowledging that there are a lot of scams in the crypto market.

Crowdsense only tracks “legitimate” cryptos

To ensure that the cryptocurrencies it tracks are legitimate, Crowdsense only tracks posts about cryptocurrencies that have reached a certain market capitalisation on CoinMarketCap. 

“This ensures to some level that the posts we track are related to coins validated by a leading platform,” explains Tobias. “In addition, we provide a credibility score for each event and for each post in our system, so users can decide if they trust the sources.”

In Chainalysis’s “Geography of Cryptocurrency” report, Krishna Sriram, managing director at Quantstamp referred to social media influencers who found the cryptocurrency YouTube channel Superpumped as examples of influencers “discussing the merits of different projects in a nuanced way”.

Binance says it is committed to cultivating responsible trading habits and works with YouTubers. “We also ran a responsible trading campaign recently,” says its spokesperson.

But according to Zhong, TikTok and YouTube’s removal of content that promotes crypto trading is justified by the large number of finfluencers across different social media platforms who are followed by novice investors.

More than 52% of influencers post misleading content

“Investors with limited financial literacy or investment knowledge are vulnerable to bad advice from finfluencers who are not necessarily investment experts,” Zhong observes, referencing research conducted by Plaxful earlier this year which analysed more than 1,200 finfluencer videos on TikTok. 

This analysis flagged 14% of content as misleading as they did not include a disclaimer, and encouraged people to invest in specific assets; make an investment with the implication that it will make them more money; and/or invest a particular amount of their savings or income.

More than half (52%) of influencer accounts analysed had posted at least one misleading video. These accounts had a total of nine and half million followers and Plaxful calculated that misleading content had been viewed more than 28 million times.

Henri Arslanian, fintech and crypto leader Asia at PwC Hong Kong is an adjunct professor at the University of Hong Kong with more than half a million LinkedIn followers and 40,000 subscribers to his weekly fintech and crypto newsletter.

Good content costs money 

Arslanian says there is a significant difference between people who spend time and money producing educational content on the topic of crypto and influencers who are promoting specific tokens.

“There are costs involved if you want to produce top class content,” he says. “From day one I have covered all the costs personally and only started accepting sponsorship this year. My 60 second weekly Crypto Capsule show takes me anywhere from 4-6 hours to produce including researching, writing, editing, filming, editing, producing, posting and distributing.”

Arslanian – who says he spends up to 14 hours producing his weekly newsletter – claims the reality is that young people will go to online platforms to learn about such topics. “So you either make it accessible but keep the bad apples away, or users will go to other platforms to get their answers.”

Read more: MAS says finfluencers need to comply with disclosure rules

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