Italy's CONSOB Puts 'Finfluencers' on Notice Amid ESMA's Crypto Risk Warnings

The Italian securities regulator, CONSOB, has recently amplified a critical message concerning the promotion of crypto assets by social media influencers, often dubbed "finfluencers." This action involves sharing a factsheet from the European Securities and Markets Authority (ESMA), serving as a clear warning that existing EU regulations governing investment recommendations and advertising are fully applicable to the crypto space.

This development underscores the growing concern among regulatory bodies regarding the potential for misleading or unsubstantiated information disseminated through social media channels to impact investor decisions, especially in the volatile cryptocurrency market. The move aims to ensure that individuals promoting crypto assets on platforms like YouTube, TikTok, and Instagram adhere to established standards of transparency and accuracy.

Expert View

The increased regulatory scrutiny of finfluencers is a natural progression in the maturation of the cryptocurrency market. For a long time, the crypto space operated largely outside traditional regulatory frameworks. However, as adoption has grown, so has the potential for consumer harm. ESMA and CONSOB's actions signal a desire to protect retail investors from potentially biased or misleading information, particularly given the inherent complexity and risk associated with many crypto assets.

It is important to note that this isn't necessarily an attempt to stifle innovation, but rather a push for responsible promotion. The key challenge lies in clearly defining what constitutes "investment advice" in the context of social media and enforcing these rules effectively across a diverse range of platforms and content creators. The regulatory definition of "investment recommendation" can be open to interpretation, and this may create some grey areas for content creators.

What To Watch

Several key areas merit close attention in the wake of this announcement. First, the specific enforcement actions taken by CONSOB against finfluencers will provide valuable insights into the regulator's approach and priorities. The clarity with which CONSOB defines acceptable promotional practices will be crucial for both influencers and investors.

Second, the response from the finfluencer community itself will be telling. Will influencers adapt their content to comply with the new guidelines, or will they resist regulation? The effectiveness of ESMA and CONSOB’s initiatives will depend, in part, on the willingness of platforms to cooperate in identifying and addressing problematic content.

Finally, it's important to monitor whether other EU member states will follow Italy's lead and adopt similar measures. A coordinated regulatory approach across the EU would likely have a more significant impact on the crypto finfluencer landscape.

Source: Cointelegraph