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Social networks expand crackdown on cryptocurrency ads

Shadowy close-up of bitcoin, ethereal and litecoinImage: Shadowy close-up of bitcoin, ethereal and litecoin
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The Wild West days of cryptocurrency may be drawing to a close. Even as international regulators debate how to deal with virtual currencies, Twitter and other social platforms have begun to take matters into their own hands.

As Reuters reports, Twitter will ban cryptocurrency advertising on its platform starting today. This puts it in line with the likes of Facebook and Google, which announced similar measures earlier this year.

So why are these social media giants taking a stand against crypto? It’s not because they’re jealous of the hype.

As Facebook recently noted in an update to its terms, “ads must not promote financial products and services that are frequently associated with misleading or deceptive promotional practices,” such as initial coin offerings and cryptocurrency.

With so many ICOs flooding the market in recent months, it has been difficult for government regulators — much less social platforms like Twitter and Facebook — to filter out the frauds.

But that’s only half the problem. Even genuine virtual currencies are considered highly speculative, fueling concerns that potential investors who click on these types of ads may not know what they’re getting themselves into.

What does this mean for you?

Cryptocurrencies garnered massive attention in 2017, when the price of bitcoin surged from around $1,000 near the beginning of the year to a peak of nearly $20,000 in December. Perhaps you joined the rush and invested in bitcoin last year — in which case you should already be thinking about how that investment will affect your taxes.

But there are additional concerns when it comes to cryptocurrency, some more serious than others.

For one, cryptocurrencies aren’t quite regulated like traditional currencies are, with regulations varying (not all countries guarantee cryptocurrency price or attempt to manage value). The G20 — a group of nations that represents the world’s 20 largest economies — met last week and discussed, along with other regulators and policymakers, how to supervise cryptocurrencies, but no consensus was reached.

“There are many companies who are advertising binary options, ICOs and cryptocurrencies that are not currently operating in good faith.”

Rob Leathern, Facebook Product Management Director

Additionally, cryptocurrencies are generally set up to help ensure participants’ anonymity — which lends itself to potentially illegal activity and transactions.

The lack of joint regulations means that cryptocurrency may present a fertile ground for fraudsters. Twitter, Facebook and Google all seem to have recognized this and have changed their policies in the interest of protecting users.

“We want people to continue to discover and learn about new products and services through Facebook ads without fear of scams or deception,” Facebook Product Management Director Rob Leathern wrote in a blog post announcing the company’s new ad policy. “That said, there are many companies who are advertising binary options, ICOs and cryptocurrencies that are not currently operating in good faith.”

Why should you care?

If you haven’t yet invested in cryptocurrency and are considering it, this should serve as another important reminder of how risky such an investment can be.

Twitter’s announcement of its ban has already unleashed some wild price fluctuations, with the price of bitcoin falling nearly 7% on Coinbase on Monday, March 26.

This highlights the big risks associated with any investments you make in cryptocurrency. With that kind of volatility, it’s important to know that investing in cryptocurrency of any kind may be more of a gamble than other investments. And as with any investment, make sure you’re not putting up more than you can afford to lose.

As we mentioned above, any transaction you make in cryptocurrency can have tax implications, too.

What can you do?

It can be easy to get caught up in the whirlwind of news surrounding cryptocurrency. But no matter what your best friend keeps telling you, cryptocurrency is a risky investment that calls for some careful research.

Before getting involved in cryptocurrency, take some steps to further educate yourself — both about how investing works and the intricacies of cryptocurrency.

Still confused about what cryptocurrency is? Check out this crash course on the basics of crypto in this video from “Last Week Tonight with John Oliver.” It’s a fairly thorough answer, with a dash of humor for good measure.

About the author: Brian Spychalski is a former Credit Karma freelance contributor now based in San Francisco. He has a background in corporate finance and a deep knowledge of the consumer credit market. When he’s not working, Brian can… Read more.