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Facebook, Google and Twitter Ban Cryptocurrency Ads to Prevent Scams
Regulators haven’t yet determined rules for cryptocurrencies advertising which means companies must decide their own policies. The number of Internet services that do not allow cryptocurrency ads on their sites keeps growing, beginning with Reddit in 2016, then Facebook, Snapchat and Google banned cryptocurrency ads followed by a crackdown by Mailchimp. Most recently, Twitter joins the list of companies announcing that they will ban advertising for Initial Coin Offerings and token sales.
In February, Google announced that effective June 2018, they will prohibit all cryptocurrency-related advertising. The organization will no longer permit advertising related to any cryptocurrency-related content. This restriction will include copy related to initial coin offerings (ICOs), wallets, exchanges and trading advice and will apply to all of Google’s ad platforms. This action quickly followed a similar policy change instigated by Facebook which occurred at the beginning of the year.
These bans reflect a much larger regulatory clampdown on the cryptocurrency market, with regulators in the US, China, Japan and South Korea making it clear that tougher regulations are on the horizon. The increased focus since the the beginning of 2018 has meant that the cryptocurrency market has had a tough time recovering from recent price adjustments, remaining sluggish over the first quarter of the year.
What Are Cryptocurrencies?
The easiest way to think of cryptocurrencies is to view them as a type of digital cash. They allow for smoothly continuous, undeviating, and extremely quick transactions between parties. You are meant to have full control over your money, payments and balance, and the funds are intended to be earned and spent easily and with complete transparency.
Cryptocurrencies, frequently referred to as coins, are stored in digital ‘wallets’ which are protected by a private key. Money can be spent or sent by carrying out a transaction between your wallet and someone else’s wallet. Cryptocurrencies are much like cash and can be used in whatever way you choose, paying bills, lending money to others, paying salaries or any other way you desire. Since cryptocurrencies are digital you have the convenience of being able to pay with a wallet app stored on your smartphone, with a special keychain, or in several other ways.
Bitcoin is the most widely recognized cryptocurrency, but there are hundreds of others such as Litecoin, Etherium, Zcash, Dashexist Ripple and Monero and more are constantly being created.
One of the main benefits attributed to cryptocurrency is that you don’t have to rely on a central authority to confirm your transactions. Instead, confirmation of transactions are carried out by the cryptocurrency network. In traditional transactions, credit card companies, banks, credit unions, investment companies and others oversee your relationship to your money. You rely on them to protect your information and your funds, and they are supposed to manage transactions in a way that guarantees that your finances are safe and that everything is in order. However, this also means they can take action if they believe some kind of account misuse has occurred, including freezing all of your funds. With cryptocurrency, you are the only person who owns the private key and the associated public key that makes up your cryptocurrency address.
Another intended benefit of cryptocurrencies is related to transactions being managed using a distributed method instead of through a central authority. In the case of traditional financial institutions, there is a usually a database that is a clear risk for hackers allowing others to steal your funds. In contrast, since cryptocurrencies are strictly digital, with the proper security for storage, they aren’t as susceptible to these attacks.
A final benefit of cryptocurrencies has to do with the speed with which transactions can be processed. Traditional financial transactions often take hours or days to process. Transactions involving cryptocurrencies, however, can be accomplished in seconds or minutes, a plus when you need to access your funds quickly.
So, Where's the Risk?
Cryptocurrencies are investments and like other investments they are dependent on market conditions. Volatility can greatly affect your balance both up and down and like other investment opportunities your principle could drop to zero. This is just the up front risk that is transparent with any investment.
The problem that has social media platforms banning cryptocurrency advertising is that these types of digital currencies are the new focus of criminals and money launderers. With technological advances occurring at a rapidly increasing rate, problems like malware generated specifically to steal particular types of cryptocurrency have emerged. The greater the growth in value of these currencies the greater the incentive for attempting to steal digital funds. The notion that cryptocurrency is not able to be hacked and stolen, is unfortunately, becoming less and less accurate with greater skill possessed by hackers. Cyber attacks commonly target coin wallets and attempt to compromise private keys to give unlimited access to funds.
Another issue has to do with ensuring the financial information is stored securely. If there are security issues that increase the likelihood that accounts can be compromised, lost funds are often unrecoverable as Cryptocurrency transactions cannot be reversed. Plus, since these transactions are digital they can be made to appear anonymous. This means that a thief is more likely to get away with the crime. So cryptocurrency accounts are tremendous targets for hackers intent on stealing balances including insiders. When the crime is part operation, there is often no recourse. This is a significant concern.
This is not a hypothetical risk, either. It is clear that hackers and cyber criminals have already adapted their methods to be able to attack these types of investments. The need to rely on financial institutions to act as gatekeepers has been pointed to as a downside of traditional financial accounts. Yet it is these central authorities that are the ones who can stay ahead of possible criminal schemes in an increasingly virtual world.
Facebook Bans Bitcoin and Other Cryptocurrency Ads
In January of 2018 Facebook put into place a new advertising policy related to cryptocurrency, binary options and initial coin offerings. The policy does not permit ads to be run that promote those types of products and services which includes Bitcoin. According to Facebook Product Management Director Rob Leathern, this is because they are “frequently associated with misleading or deceptive practices.” He added that while Facebook believes people should continue to learn about such products, the company feels that there are a significant number of cryptocurrency companies that aren’t operating in good faith.
The specific advertising guideline in question was altered by Facebook to read, “Ads must not promote financial products and services that are frequently associated with misleading or deceptive promotional practices, such as binary options, initial coin offerings, or cryptocurrency.”
Facebook’s policy is not only being applied to the Facebook platform but also to Facebook’s ad network. The policy has resulted in cryptocurrency and ICO advertisers losing access to the social network’s 2.2 billion users, along with Instagram's 800 million users. When you include WhatsApp and the Facebook Messenger app, that’s four of the top seven social media platforms that aren’t advertising cryptocurrencies or ICOs in any format. While initially some thought Facebooks new policy was too broad, penalizing even the legitimate cryptocurrency companies that were misleading or scamming the public, the social media giant stated they intend to adjust it later based on data they gather from reported violations.
Not wanting to seem as if it is a closed issue, Facebook said it would continue to watch the indicators to determine if and when these companies have altered their advertising practices and the way they conduct their business. They stated that they intend to revisit their new policy and to reconsider their enforcement methods to determine if the industry adjusted it’s procedures to ensure ethical advertising. While the ban continues, Facebook has encouraged it’s users to report any content that goes against this policy. As of the time of this writing, Facebook’s new policy for cryptocurrency had not changed and there were no indications that it would.
Google Bans Bitcoin and Other Cryptocurrency Ads
In March 2018, Google announced that it is banning all advertisements related to cryptocurrencies. The new policy has resulted from the increased interest in cryptocurrencies, which has resulted in criminals using advertisements to promote cryptocurrency related online scams. Google stated that this action which will take effect June 2018, is just a part of an update, which is regularly carried out, to it’s financial services policy. This means that even companies that have been vetted and shown to have legitimate cryptocurrency offerings won't be able to present ads through any of Google's ad products, which place advertising on all of its own sites as well as third-party sites.
Google’s director of sustainable ads, Scott Spencer, said, “We don’t have a crystal ball to know where the future is going to go with cryptocurrencies, but we’ve seen enough consumer harm or potential for consumer harm that it’s an area that we want to approach with extreme caution.”
One of the scams that Google has referred to is One called “crypto-jacking.” This is when scammers add new code to websites and ads that make it possible for them to use the power of other people’s computers to steal cryptocurrency.
This type of crime has been growing rapidly around the world. It was recently reported that supercomputers at Russian nuclear facilities were hacked by their own nuclear scientists in order to mine Bitcoins. In Iceland over 600 computer that had been used to mine Bitcoin were stolen to be used for the same purpose. Some anonymous hackers have used India’s leading public services commission UPSC website to commit in-browser crypto-jacking to mine Monero, a leading cryptocurrency similar to Bitcoin.
Other ways advertisements have been tied to scams include paid promotions, where celebrities are given money and other incentives to promote a cryptocurrency. People often identify with celebrities, admire them, or feel like they have something in common with them. Because of these reasons they may do what the celebrity recommends, in this case, buying cryptocurrency without first researching it. There is a common belief that celebrities are trustworthy, knowledgeable and have our best interests at heart. Sometime this is the case but sometimes it is not. While celebrities should disclose when they are being paid to promote a product, it is not illegal should they fail to do so.
Phishing attacks are among the most common cryptocurrency scams perpetrated on Google and a main reason the company has banned advertisements related to these products. Phishers buy domains and run Google ads which closely imitate popular cryptocurrency exchanges. Even the fake website looks almost exactly the same as the real one. Once you enter your credentials, the fake site redirects you to the real platform, giving the phishers access to your entire account and the thieves empty your wallet.
Twitter Bans Initial Coin Offerings and Token Sales
At the beginning of March, Twitter announced it would cryptocurrency ads, editing their terms and conditions to reflect this change in policy. The company intends to take quick action, putting the changes into place over the course of 30 days from the end of March through mid April. They also plan to ban advertising for ads on cryptocurrency exchanges and wallet services. The only exceptions are public companies that are listed on major stock exchanges. In Japan, crypto related ads will only be allowed if they are under the control of the national financial regulator.
Twitter states that safety for users is the primary reason for the ban. The company has already prevented accounts from running cryptocurrency related ads that are deceptive. They also have started removing international accounts that use impersonations of famous figures like Elon Musk, John McAfee, and Ethereum co-founder Vitalik Buterin to solicit buyers.
In an effort to explain the decision, Twitter representatives stated, “We know that this type of content is often associated with deception and fraud, both organic and paid, and we are proactively implementing several signals to prevent these types of accounts from engaging with others in a deceptive manner.”
Have you ever bought Bitcoin or any other type of cryptocurrency?
Although cryptocurrencies are continuing to increase in popularity, harmful ads and online scams are still affecting the ability to securely invest. These problems tell potential investors that the market is still unregulated and untrustworthy. Even the technology behind cryptocurrencies appears to not be as secure as originally believed. For these reasons, social media platforms banning advertisements for these products should be commended for attempting to regulate the sector and decrease people becoming victims of harmful cryptocurrency scams. While obviously not all cryptocurrency ads are scams, the large number that are schemes, coupled with the lack of sufficient regulatory control and inadequate consequences for misconduct, make banning relevant advertisements a responsible course of action.
Are Facebook, Google and other social media companies that are banning cryptocurrency ads being sued?
It has been reported by Russian News agency TASS, that the Eurasian Association of Blockchain intend to file a joint lawsuit in May 2018 against social media giants Google, Twitter, Facebook, and Yandex for refusing to allow crypto-related advertising on their sites. The suit will be filed in May 2018.
What countries make up the Eurasian Association of Blockchain?
The association was originally made up of global associations headquartered in Russia, China, and South Korea. Specifically, the Russian Association of Cryptocurrency and Blockchain (RACIB), the Korea Venture Business Associations, and LCBT, along with a Chinese association of crypto investors formed the association. Other Cryptocurrency and Blockchain organizations that have joined the Eurasian Association are located in Switzerland, Kazakhstan, and Armenia. Reports indicate that the most recent members of the joint lawsuit include the Swiss InnMind fintech firm, the Armenian Blockchain Association, and the Kazakhstan Blockchain and Cryptocurrency Association.
Why was the Eurasian Association formed?
These organizations created the Eurasian Association of Blockchain to give them the ability to raise funds to initiate, support and formulate the lawsuit. It also allows them to act as one unified body.
What are the Social Media Companies being accused of in regards to banning cryptocurrency ads?
The Russian Association of Crypto-Currency and Block-Finish (RACIB) head, Yuri Pripachkin has made a number of accusations regarding the actions of the social media companies named in the suit, claiming their new advertising policies are illegal. The main claim against the social media companies is collusion, defined as the act of conspiring with others to increase the economic benefit of those in the group. Pripachkin said that even a single refusal to place cryptocurrency advertising constitutes collusion.
The basis of the lawsuit is the assertion that the four companies in question have entered into a cartel agreement intended to influence market conditions related to cryptocurrencies. The Eurasian Association has stated that the actions of the companies named in the suit are meant to establish a monopoly position and have negatively affected the cryptocurrency market. RACIB officials assert that the ICO ban alone could result in Russia’s economy losing $1.5 billion in the next few years. It is estimated that the ICO’s which are held by Russian nationals living abroad account for over 10% of the global ICO market. It is believed that these holdings will suffer a significant loss due to the social media ad ban. Considering such huge losses it is not expected that the coalition will give up the lawsuit or settle out of court unless the ad bans are reversed and a large fine is levied against the social media companies with the proceeds given to the Eurasian Association
In addition to the collusion allegations, Pripachkin also accused Twitter management of allowing users and shareholders to purchase a cryptocurrency subscription created exclusively for the Twitter community while banning all others. He said the various actions of the four social media corporations individually and together have resulted in a 50 percent drop in the cryptocurrency market in the first three months of 2018. Indicators suggest that the market is likely to keep crashing should the courts not prevent social media companies that have already banned ads from continuing to do so and preventing others from jumping on the bandwagon, Pripachkin warned.
A representative of the Association stated that they will also file claims against any shareholders of the companies being sued if it is determined they own and benefit from crypto wallets. It is unclear how the they intend to connect personal ownership of crypto wallets to corporate advertising of cryptocurrency.
Where and when will the Eurasian Association of Bitcoin file the lawsuit against the social media companies?
The association intends to file the suit in the U.S. since they believe certain states to be cryptocurrency “friendly.” In particular, the state of Wyoming has been mentioned as the state legislature there has passed laws which exempt cryptocurrency related earnings from state property taxes. Wyoming has also been seen to relax securities regulations. It is currently believed the lawsuit will be filed in the New York district court with the claimant being an unidentified Luxembourg-based crypto fund. Class action suits are also expected to be brought in other U.S. jurisdictions including cryptocurrency friendly states such as Wyoming and states where the social media company headquarters are located. The suit will be filed in May 2018.
© 2018 Natalie Frank