What All Businesses Can Learn From Recent Crypto Missteps

President and CEO of BBB national programsa non-profit organization dedicated to promoting a more responsible, trustworthy marketplace.

While the business, according to the new Edelman Trust Barometer, continues to gain trust around the world, those operating in the cryptocurrency industry face some stiff confidence headwinds.

Crypto is suffering not only because of the alleged misconduct of Sam Bankman-Fried, but also because of a series of self-inflicted problems the industry has inflicted on itself over the past two years, especially in social media.

While many associate the Securities and Exchange Commission (SEC) with regulating cryptocurrency in the United States, the Federal Trade Commission (FTC) has an important role in enforcing consumer protection laws, requiring all advertising to be truthful and accurate and influencers and spokespersons to be transparent. about when they are compensated for things like reviews or recommendations.

According to December 2022 reporting by Bloomberg and others, the FTC is investigating several crypto firms over allegations that their ads were misleading or deceptive. For example, cryptocurrency exchange FTX has been sued for investors making false advertising claims. And in November, the National Advertising Division of my organization, BBB National Programs, filed suit against a well-known financial services platform for misleading advertising, suggesting that consumers can achieve significant wealth with minimal investment.

The Consumer Financial Protection Bureau (CFPB) is also placing cryptocurrency under a microscope, with CFPB Director Rohit Chopra warning that Americans are “reporting transaction problems, frozen accounts and lost savings when it comes to crypto assets.” Among others, the Commodity Futures Trading Commission (CFTC), the Department of Justice (DOJ), the Federal Deposit Insurance Corporation (FDIC), and a number of government agencies have also engaged in these cases with varying degrees of success. States across the country have passed or are actively considering cryptocurrency laws and regulations, and this first quarter of the year is always a period when laws passed in one state tend to be noticed—and sometimes replicated—by others.

Whether it’s the FTC, SEC, CFPB, CFTC or state regulatory agencies leading enforcement, or industry self-regulation as advocated by University of Colorado Boulder’s Eric Alston, the lessons of the crypto crisis can apply to businesses across the board. For example, it is never a good idea to publish guarantees that your business cannot fulfill. And when it comes to marketing materials, it’s no good faking it until you make it. All advertising claims must be factually supported with evidence.

In addition, the government’s press on crypto highlights a few other important advertising best practices for businesses in general:

• Always proceed with caution in your advertising practices.

• If you compensate an influencer or endorse, disclose it.

• Do not deceive stakeholders about potential earnings.

• Do not suppress negative reviews.

• Make sure you can back up your claims – expressed or implied – with evidence.

Although the crypto market itself is quite revolutionary, the challenges of introducing the concept to consumers are not new. Emerging markets have always been tested in balancing innovation and excitement with the need for consumer protection. When a product or service first hits the market, thoughtful consumer education about the benefits and great value of the new thing is key.

Often they are best positioned to educate a consumer about the companies in the given industry. But for education to be meaningful, companies must start with a strong sense of self-awareness, followed by a willingness to turn that awareness into responsible action, embodied by truthful, transparent marketing.

So when the next innovation emerges in your business or nonprofit, take steps to create excitement. But as the recent cryptocurrency confusion and crashes have taught us, avoid pitfalls by making promotional claims that you can back up with evidence.

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