The Financial Industry Regulatory Authority (FINRA) reported this week that around 70% of cryptocurrency-related communications in a recent survey contained potentially false or misleading claims.
in a report Published on January 23, FINRA said it reviewed more than 500 retail communications related to crypto assets from November 2022. The financial watchdog found that more than 70% of the communications reviewed had โsubstantial potential violationsโ of its rules on communications with the public.
โWith the growth of this market and increased interest in cryptoassets, the potential harm caused by problematic communications has also increased.โ said Ira Gluck, senior director at FINRA.
Gluck noted that cryptocurrency-related communications could range from a podcast to a commercial during the Super Bowl. The violations potentially included misleading statements about cryptocurrencies and misrepresentations about how federal securities law protections apply to digital assets.
Read more: JPMorgan Downgrades Coinbase Stock to 'Underweight' Amid Price Drop
Key details:
- FINRA reviewed more than 500 cryptocurrency-related retail communications from November 2022.
- More than 70% contained potentially false, exaggerated or misleading claims.
- The violations included misleading statements about digital assets and securities law protections.
- FINRA says โproblematic communicationsโ in the cryptocurrency market pose increasing harm.
Crypto communications under scrutiny
FINRA added that the targeted examination provided crypto companies with questions to consider regarding their public communications. The regulator launched a review of public communications related to cryptocurrencies after the collapse of the cryptocurrency exchange FTX in November 2022.
FTX, prior to its bankruptcy, engaged in a major marketing campaign in the digital asset space, including celebrity endorsements, sponsorship of sports venues, and numerous media appearances by former CEO Sam Bankman-Fried.
FINRA, as a non-governmental regulator, has powers granted by Congress to oversee certain areas of investor protection. FINRA has collaborated with the Securities and Exchange Commission (SEC) to approve digital asset broker licenses and penalize violations of guidelines.
Read more: OKX to Compensate Users After OKB Token Flash Failure
This recent report highlights increased scrutiny of cryptocurrency communications aimed at retail investors. Regulators have raised concerns about inflated claims and incomplete disclosures in the digital asset space.
The focus on retail communications follows the high-profile collapse of FTX, which had a broad marketing presence. Other major companies, such as Celsius Network and Voyager Digital, also filed for bankruptcy in 2022 amid a broader market downturn.
