Cryptocurrency Ads Are Unethical and Need to Stop — These Are the 4 Reasons Why - MARKETING Magazine Asia


Cryptocurrency Ads Are Unethical and Need to Stop — These Are the 4 Reasons Why

In the late summer of 2021, a new “meme coin” called Floki Inu began to “lockdown” the city of London. Its mission: to create brand awareness for the Floki Inu token.

“The London Underground and 300 buses campaign is expected to have an impact of 93.7 MILLION during the campaign period, exposing the #FLOKI brand to millions of people in London!” Source: Floki Inu (@RealFlokiInu) / Twitter

All over the transport network in the city of London, cute ads blaring the unmissable message of “Missed Doge? Get Floki” competed for consumer attention. As a marketer, I was very impressed. Simple message. Bold placement for maximum visibility. All very nice. Certainly, there are a lot of marketing lessons to be learned here.

There’s just one big problem.

The ad campaign didn’t go well with the Advertising Standards Authority in the UK. After receiving complaints about the campaign, the organization launched an investigation to clarify if any advertising rules and regulations were broken.

As a marketer, it boggles my mind that the investigation is happening after the campaign. There’s no way these ads could have slid through internal checks. For me, the fundamental question is this — should crypto-ads even be allowed in the first place?

I’m not a cryptocurrency hater. In the interest of full disclosure, I own several cryptocurrencies.

Yet, despite my conviction, my professional opinion is that advertising cryptocurrency is problematic and perhaps even unethical. Here’s why.

#1: Non-savvy audiences are often the target of cryptocurrency ad campaigns

The target of cryptocurrency advertising campaigns is the general public. The average person is not cryptocurrency-savvy. When companies advertise makeup, or skin creams, or Coca-Cola, cars, or some other product — the product sold is not shrouded in complicated terminology. Consumers know what they are buying when they make a purchase.

<h3“Newbies” don’t know what they’re doing

This is not always the case in the sometimes obscure world of cryptocurrency that’s often shrouded in techno-speak. Often, people do not know what they are buying! According to a study in 2021 by behavioral finance experts Oxford Risk, 36% of UK retail investors said that they didn’t understand what they were getting into.

Another survey conducted by CryptoLiteracy.org found that 98% of 1500 people surveyed in the US, Mexico, and Brazil failed to properly understand basic cryptocurrency concepts. A similar type of survey earlier in 2021 by Cardify — a market research platform — revealed that 33.5% of buyers have no zero to little knowledge about cryptocurrency.

So what happens when a meme token like Floki Inu (for perspective, Floki Inu refers to themselves as a movement) manages to attract unsavvy retail investors who decide to pile in after having a taste of FOMO (fear-of-missing out)? Well, the screenshot below shows an example:

People are shocked that the transaction fee costs more than the value they bought! (Author’s screenshot, from Floki Inu Twitter, profile names removed to protect personal information)

These same people who were only too eager to shell out money to buy digital tokens are shocked that they have to shell out more in transaction fees than the dollar amount of the token that they are paying for.

Decentralized finance (DeFi) is complicated and a minefield for the uninitiated

The reason for this is simple —Floki Inu, along with many other so-called “meme coins” are commonly deployed on the Ethereum blockchain. Due to their extremely speculative nature, they are usually not listed on centralized exchanges like Crypto.com or Coinbase. To validate transactions on the Ethereum blockchain, transactions need to be paid to “miners.”

Uniswap, a decentralized exchange that runs on the Ethereum blockchain, is notorious for having one of the highest transaction fees in the entire Ethereum ecosystem. Just look at the chart below to see how expensive the transactions can get!

Uniswap “Gas” Fees — As of Dec 04, 2021, 10:37 UTC. Source: Ethereum Gas Tracker | Etherscan

Recall the survey I mentioned earlier? Only 3% of people got the DeFi question on the crypto-quiz right. For your information, the question is:

Select all that apply. Which of the following statements best describes decentralized finance, also known as DeFi?

– A system that is not controlled by a single source or entity
– The process of removing middlemen like banks and brokerage firms from financial products
– A new system of finance that uses smart contracts on blockchain
– None of these
– I don’t know

If the target audience is so unsavvy to the point that they don’t even know what DeFi is (what’s DeFi?), is it ethical to run ads to promote tokens that require people to jump through hoops and loops and exorbitant fees, and endure the risk of scams?

<h3″>#2: Influencers and social media are often used to promote cryptocurrency… who don’t really know what they are promoting either

Influencer marketing is big business. According to Marketing Hub, the influencer marketing business is estimated to be about 13.8 billion USD in 2021. Marketers often engage influencers to sell a variety of things — beauty, fashion, gadgets, household products. The list goes on.

The rise of “crypto influencer marketing”

Cryptocurrency has become the latest thing that influencers are promoting. Even Kim Kardashian has jumped on the hype train, promoting a new altcoin called “Ethereum Max.”

YouTubers, live streamers, and all kinds of social media influencers are jumping aboard this hype wagon. Just type “crypto” into Youtube or search #crypto on Instagram. You’ll see a long list of influencers who are outright shilling coins. The question we need to ask is, are they personally invested? Are they perhaps paid? Who knows. In most industries, if a post is a sponsored post, it needs to be declared as such. But this doesn’t appear to be the case in the crypto-world. As Mashable puts it, this is all a very shady world of influencer-led cryptocurrency promotion.

Influencers are complicit in promoting scams

The worst thing? Some of these influencers are unaware that they are promoting scams. Allegedly.

Take the case of Matt Lorian, who promoted a scam called “Mando Coin” — named after the popular Disney+ Star Wars drama — The Mandalorian (another indication that it’s a scam is if it rides on some popular cultural reference… because trend marketing.)

The shocking thing? Matt Lorian is barely out of his teens. At the time that Mando Coin was found out to be a scam, Matt Lorian was only 17. In a field where scams are aplenty and anyone can be a crypto-influencer in the age of social media platforms — even a 17-year-old teenager — I think we need to be asking very serious questions.

Another scam case involving a popular e-sports (gaming) clan FaZe Clan that promoted what was supposed to be a charity token called “Save the Kids,” turned out to be a scam as well.

With social media tools enabling the rise of barely legal influencers who are themselves likely promoting to their barely legal followers, where the product being sold is has very few barriers to entry, isn’t the failure to regulate the influencer marketing of cryptocurrency a recipe for disaster in the making?

Social media platforms need to be part of the solution

According to research conducted by the Financial Conduct Authority, a financial watchdog authority in the UK, 40% of new users got into cryptocurrency after seeing an ad on social media ad. Plus, not surprisingly, with all this influencer-driven crypto-promotion. there are about 11.5m hashtags on Instagram about cryptocurrency, and 1.5 billion views on cryptocurrency posts on TikTok. (Source)

Unless social media platform companies take measures to stop or at least regulate influencers marketing cryptocurrencies, this will not be the last of it.

Tik Tok has already banned influencers from promoting cryptocurrency and related services on its platform, which is probably the right thing to do.

Ironically, Facebook has recently reversed its position on a blanket ban on cryptocurrency ads. Cryptocurrency ads can now be submitted to the Facebook platform and must fulfill certain regulatory criteria before they can be allowed to run. Whether or not this helps to make crypto-ads more “ethical” is questionable. But it is a step in the right direction.

#3: There’s no consumer protection

We love Customer Support. Photo by Charanjeet Dhiman on Unsplash

Marketers are in the business of selling a product to fulfill consumer needs. As any good marketer knows, your best marketing tool is word-of-mouth, which comes not only from the experience of the product but also the post-purchase consumer experience. Part of the consumer experience comes from consumer protection. That’s why American Express has consistently performed well on customer satisfaction surveys. That’s why 75% of customers on Zappos.com are repeat customers. If you had your card compromised, American Express can block the transactions. If you bought the wrong shoe, you can get a refund.

In most developed countries with proper rule of law, consumers can also take legal action against companies if the product sold is found to cause harm. This is also the reason why the advertising of alcohol and tobacco and is highly regulated in most countries. Tobacco advertising, in particular, is banned outright in some countries.

This is not the case with cryptocurrency.

There is no consumer protection in decentralized finance (DeFi)

In the world of decentralized finance or DeFi for short, things are not so clear-cut (What’s DeFi?: Read this to get up to speed). You are not buying anything tangible from a company. Transactions are conducted without going through a third party, and traders interact with code rather than people. Tokens are aplenty and many of them outright scams, as we have seen. Anyone can easily and quickly launch any token they want on one of the blockchains like the Binance Smart Chain or Ethereum by simply following the instructions. It’s not difficult. All of this information is readily available online. Don’t believe me? You can verify this yourself by searching on Youtube.

Unlike traditional companies, decentralized organizations such as Floki Inu and Shiba Inu function more like loose, tokenized communities. Their founders and development teams are also usually anonymous. Just take a look at the development team of Floki Inu:

Floki Inu “Team.” Do you honestly want to buy a token from this team? Source: Floki Inu

This “lawlessness” means that retail investors do not get any kind of consumer protection in DeFi (and for good reason, since the goal of DeFi, more generally, is to circumvent banks and central authorities). You, and you alone, are responsible for your decisions. Which can turn out to be a disaster, since, to go back to #1, most people who are being targeted are new to the space. To highlight one example, in the screenshot below, someone who was ready to buy the Floki Inu token made a transaction mistake. Looking at his pitiful cries for help, my heart goes out to him, but it is doubtful if any kind of “customer support” exists.

(Author’s screenshot, from Floki Inu Twitter, profile names removed to protect personal information)

There’s no consumer protection either when you hold crypto-assets with a third party

But what about regulated cryptocurrency companies? Surely such companies provide customer support? Sure, if you have an account with Coinbase or Crypto.com and you need help with trading, you might be able to contact customer service for help. Plus, these companies are not “decentralized” — people do need to register their information to purchase cryptocurrency, and you can always turn to customer service for support if needed.

Still, crypto-companies are not banks and cryptocurrency is certainly not legal tender (except in El Salvador). If you choose to hold your crypto-assets with an exchange rather than hold it yourself, you run the risk of your assets being hacked (to be sure, you can also get hacked if you choose to hold crypto-assets yourself). Crypto-assets are not treated like bank deposits and are not certainly not insured by the government.

Furthermore further, that this is the world of crypto we are talking about. One of the key features of blockchains is that they are immutable by design. All transactions are final and irreversible. Now, irreversible transactions can be a very bad thing, especially for someone new to the space of cryptocurrency (again, see #1).

Crypto-assets have a low barrier to purchase and a high propensity to cause harm

There is another problem — one that might be easily overlooked.In my experience with the Crypto.com app, all I had to do was to submit some personal information, and then within 2 days, I was able to buy cryptocurrencies with my credit card. If I can do this, anyone can. Even someone with zero knowledge of cryptocurrency.

To be clear, for experienced investors, it is a boon to be able to access the cryptocurrency markets so quickly and in such a frictionless manner. For newer retail investors, their investment can quickly blow up in their face. Considering that cryptocurrencies are highly volatile, I think that investors who sign-up for cryptocurrency trading accounts should be tested on their cryptocurrency knowledge before allowing them to make any transactions. And, if they fail, they should be given the proper knowledge and education before being allowed to do so. (Of course, this applies to all kinds of trading — including forex/commodities/forex/stock/options trading, but you don’t see these financial assets being advertised in your face so heavily!)

It’s one thing to get caught up with the narrative of wanting to “take back the power from banks” — but when prices start going south, people end up panicking. And that’s when things take a deadly turn. When people perhaps wished that someone had warned them of the dangers of cryptocurrencies before they had started.

Of course, people don’t get into cryptocurrency fully cognizant of the risks. That’s not how people get into cryptocurrency.

People usually get in due to fear of missing out.

#4: Cryptocurrency advertising plays heavily on people’s emotions

All good marketing at its core is about speaking to people’s emotions. But in the field of cryptocurrency, where the stakes are high and emotions follow the volatility of the crypto-markets, we should question if it is ethical to add fuel to the fire.

Going back to our Floki Inu example, one does not need to be a psychologist to see that the marketing copy of “Missed Doge? Get Floki” is a direct appeal to fear of missing out (FOMO). When retail investors jump into a financial market to chase gains, it usually does not end well.

But surely, some ads are good, because they appeal to positive emotions like inclusivity, right? Ads like Coin Cloud’s Currency of Currency starring and directed by Spike Lee (featured below) paints the narrative of cryptocurrency being inclusive and socially progressive — surely this is not a bad thing?

For context,Coin Cloud is a company that operates crypto-ATMs. These machines allow anyone to buy up to $500 worth of cryptocurrency just by putting in their phone number with no other questions asked. Unsurprisingly, more than 50% of Coin Cloud’s customers are buying cryptocurrency for the first time (source).

“Our currency is not current. Old money, as rich as it looks, is flat-out broke.
Don’t believe me? I’ve got the receipts.

We call it green, but it’s only white. Where’s the women? The black folks? And the people of color? Native Americans got a nickel. A nickel! People don’t even stop to pick up a nickel off the sidewalk. Seven million Americans have no bank account. Twenty million are underbanked! Old money is not going to pick us up. It pushes us down. Exploits. Systemically oppresses.

But new money?
New money is positive. Inclusive. Fluid. Strong. Culturally rich. Where status is anything but status quo. Do your own research. The digital rebellion is here. Old money is out! New money is in!”

The ad oozes with positive messages of social justice, inclusivity, and fluidity, echoing the Zeitgeist of our timesThe message is clear. Cryptocurrency is a champion of the people, and fiat currency is not (cue visual to burn up the dollar). There is a disclaimer to “do your own research.” Still one wonders — is it ethical to appropriate these messages to promote cryptocurrency, especially when anyone can buy it by simply going up to an ATM?

Even Crypto.com’s Fortune Favors the Bold ad featuring Matt Damon ends up being somewhat problematic, in my opinion:

“History is filled with almosts. With those who almost adventured, those who almost achieved. But ultimately, for them, it proved to be too much.
Then, there are others, the ones who embrace the moment and commit.

And in these moments of truth, these men and women, these mere mortals — just like you and me — as they peer over the edge, they calm their minds, and steel their nerves, with 4 simple words that have been whispered by the intrepid since the time of the Romans — Fortune Favors the Brave.”

So says Matt Damon. The tone is inspirational and the message is a call to action, but underneath the fancy CGI, one gets the encoded message — “Don’t be that idiot who almost bought crypto, but never did.” What’s the emotion that the ad is trying to appeal to? Fear of missing out.

In pushing these ads, the advertisers not only use positive images and messages. They also use celebrities to promote cryptocurrencies to achieve awareness and engagement. Celebrity endorsement, after all, lends credibility to products — But, if the product in question is cryptocurrency, who should be responsible when things go south?

When the next crypto market crash comes, and naïve investors panic and end up losing their shirts, “I bought because Matt Damon was promoting it” is not going to bring their money back.

Summary: We need cryptocurrency education and regulation, not advertisements

We need education, not advertisements. Photo by Deleece Cook on Unsplash

As I said at the beginning of this article, I am not a “no-coiner.” I believe that the technological and social revolution that Bitcoin unleashed — and which is still ongoing — is rapidly re-writing our ideas about money, trust, settlement, value, and ownership.

I don’t believe that cryptocurrencies are inherently scams, although many do turn out to be the case. Case in point — Banks and governments around the world are taking note and preparing for a future where cryptocurrency is here to stay. (Details here). Although countries like China and India make the news for banning cryptocurrency, there are also many pro-crypto countries like Singapore, and JapanSwitzerland, and others, which will likely become centers driving cryptocurrency innovation.

Cryptocurrency is here to stay

Even if Charlie Munger of Berkshire Hathaway wishes that cryptocurrency had never been invented, there’s no changing this fact. My opinion is that cryptocurrency has become mainstream, and no amount of wishing will wish it away. If it’s here to stay, then, it is best to get crypto-literate regardless of one’s ideological or moral position on cryptocurrency.

Why?

Because, despite all the narratives being inclusive, make no mistake — cryptocurrency will also exclude. Already, fortunes have been made and lost from the past booms and busts of the crypto market cycle. I believe that the growth of cryptocurrency is going to create a society based on a new kind of inequality. The winners will be those that can maneuver with agility within this newly burgeoning crypto-space.

The crypto-space is filled with misinformation

Yet, there remains a lot of misinformation and over-simplification in the field. For example, many people continue to (erroneously) believe that cryptocurrency has no real use other than for gambling or buying drugs on the dark web. Yet this is an over-simplification and ignores the developments happening in the space of decentralized apps. Some organizations are doing very innovative things with cryptocurrency, and the wider distributed ledger technology that forms the basis of blockchains. Developments in this space are going to “accelerate” the speed of money. Those who cannot keep up with the new speed of money will be left behind.

Regulation and education must go hand-in-hand

This is why I believe we need more education to improve crypto-literacy. We need cryptocurrency marketers to shift from a “promotion” mindset towards an “education mindset.” Online courses and virtual seminars need to become a standard practice for the cryptocurrency industry. The goal should not be to exploit the emotions of consumers and lure them into making a fast buck, but to provide the tools and resources to educate consumers, so that they may make their own decision.

It is also my belief that financial regulation is only one pillar of the regulatory framework. Advertising regulations by both consumer protection organizations, and by social media platform companies need to be enforced to put an end to the rampant shilling of cryptocurrency.


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