The Australian Securities and Investments Commission (ASIC) has issued new warnings to financial influencers.
This was contained in information sheet, highlighting what influencers and the companies that hire them need to consider. While cryptocurrency is not specifically mentioned, it is very likely that these rules apply to the cryptocurrency industry.
ASIC issues warning to financial influencers
The rule appears to target the promotion of unlicensed financial services, something that includes crypto services. In a warning to financial influencers who are unsure whether the brand violates the law, ASIC states:
“Think carefully about your content and whether you are providing financial services without a license.”
The new information sheet says that influential people may need a license to give financial advice. Penalties for breaking the rules appear severe, with companies facing fines of up to $5 million, while individuals could face up to five years in prison.
Rules come in the midst of new efforts by regulators to protect consumers in the country. In recent weeks, a number of Australians have fallen victim to targeted crypto scams.
Regulators have also stepped up their efforts to prevent and recently filed legal action against Meta for failing to prevent the promotion of crypto scams on its platforms.
Influencers dominate young people
Influencers have achieved a prominent role in the new economy, which requires a license. A 2021 ASIC Survey estimated that 33% of citizens between 18 and 21 years old follow financial influencers. He also found that 64% of young people in the country changed their behavior because of an influencer.
Based on this, ASIC believes that it is important to regulate the sector. ASIC Commissioner Cathie Armor stated that
Influencers who talk about financial products and services online must comply with financial services laws. If they don’t, they risk substantial penalties and put investors at risk.
What really qualifies as influencing?
However, there are questions about what qualifies as influence. ASIC’s explanation suggests that influencing has to do with recommending rather than simply stating facts.
Modify old content / minimize discussion of investments / do not mention any financial products, funds, etc.
Some may choose to close shop – I know one who is – while others will likely continue to enjoy in a limited capacity.
Sad situation for freedom of expression.
— Dave Gow | Strong Money Australia (@strongmoneyaus) April 2, 2022
But financial blogger Dave Gow, who runs Strong Money Grow, wrote that
Writing almost anything could influence someone to invest or use any financial product.
Some believe that these rules should not apply to cryptocurrencies. One of them is Senator Andrew Bragg, who said that
ASIC’s current policy applies the law to cryptocurrencies to the extent that digital assets fall within the definition of a financial product. Crypto is currently unregulated and not a financial product… I think we can do more.
This statement echoes the general call for more regulatory clarity on cryptocurrencies in the country. The authorities seem to be working on that at the moment, although nothing is concrete yet.