Are crypto investors losing faith in finfluencers?

Twenty-six-year-old Vivek Shetty (name changed on request), who works with a digital marketing agency, has been investing in cryptocurrency since early 2021. Shetty has been following creators like Ankur Warikoo, Akshat Shrivastava and CA Rachana Ranade for investment tips. However, he only makes investment decisions after consulting his father and the family wealth manager. According to Shetty, for beginners, following content creators for context and understanding of the market dynamics and investment options is a good start. But “at the end of the day, they are people on the internet. I wouldn’t risk my money based on a YouTube video. I can’t trust them.”

On July 4, 2022, Singapore-based crypto trading platform Vauld suspended all its operations, including withdrawals and deposits. This comes amidst crypto winter as markets continue to struggle to attract new investors even as some recovery is being witnessed. Globally, about $400 billion worth of investor wealth has been wiped out in crypto over the last few weeks. Most of them are young and first time investors. As per a report by crypto exchange Gemini, more than 54% Indians in the crypto space are first-time investors.

Cryptocurrency is a volatile market - the price of a single Bitcoin today is around Rs 17.50 lakh; less than half its value in November 2021.

It’s not just the current stormy market conditions that’s giving brands in the category a tough time. “With blurry advertising guidelines and no regulations, there is a massive grey area,” says a senior executive of a creative shop who has worked closely with crypto and BFSI clients. He says, “Technically, influencers aren’t selling an illegal product. Some of them subtly mention it in their videos, a few oversell it, and others are taking a neutral stand. There is no one to tell them if they are being irresponsible apart from a set of social media users who are well aware of the category. You can flag it off to the Advertising Standards Council of India that’s about it.”

In June 2022, as per ASCI, 92% of all crypto advertisement violations that occurred between the months of January 2022 and May 2022 can be linked to social media influencers in the country. Most of these influencer ads were a mix of breaching ASCI’s influencer guidelines and crypto guidelines in advertising. The breaches included failure to add disclaimers around crypto trading as well as tags that noted that a particular post was a paid partnership.

Manisha Kapoor, CEO and secretary general, ASCI, tells Storyboard18, that while a lot of consumers are aware that crypto is a relatively new sector that is unregulated, it also important for crypto exchange platforms to carry the mandated disclaimer in their advertising informing them that it’s a high-risk investment category. She further adds, “Influencers, like all endorsers, need to do full due diligence before talking about products, regardless of the category.”

Who is really responsible?

Post the news of Vauld’s shutdown, a number of social media users started pointing out how top Indian finfluencers like P.R. Sundar, Ankur Warikoo, Akshat Srivastav, and Booming Bulls, made “irresponsibly” content for the brand.

Shrivastava has a video portfolio on his YouTube channel, which has over a million followers, explaining cryptocurrencies, and related concepts like tokens, stablecoins, and equity. He has also made several videos for Vauld's YouTube channel. On his personal channel he has videos with clickbaity titles like “The best Fixed Deposit option with 0 taxes!”, “Cryptos will SKYROCKET!” in partnership with Vauld. Srivastava in all of these videos gave full disclosure that its educational content and not a piece of investment advice.

In October 2021, Warikoo, a digital influencer who discusses entrepreneurship, finance, and investment, made a YouTube video discussing how he uses Vauld for bitcoin-based fixed deposits. In the video's description, he stated that he would not have otherwise invested in a fixed deposit. Since Vauld offered special fixed deposits for crypto investments, which was an easy way to make money over and above the appreciation in the value of crypto investments, he went for it. He used the “paid promotion” tag in this video. Warikoo updated the video’s description with this note, “At 8:21am on July 4th 2022, I received an email from Darshan, the CEO of Vauld. Due to the volatile nature of the crypto market, Vauld has decided to pause all withdrawals, trading and deposits. Which means our monies are stuck for now. This is extremely unfortunate and not something I would have wished for, when I worked with Vauld. As all of us (that includes me - Even my money is with Vauld) wait to see what happens next, I hope you all invested wisely in crypto to no more than 5-10% of your total portfolio, as I have mentioned always.”

In theory, Srivastava, Warikoo, and other creators who created content for Vauld haven’t violated any visible rules. However, the argument is that they and other finfluencers need to be extra careful with brand collaborations, do better homework on brands, and make disclosures louder and clearer.

An active investor in crypto startups in India tells Storyboard18 that it’s “high time that finfluencers get their act together.” He opines, “Crypto attracts young investors who live and breathe on social media. It is a joint responsibility of the brands, influencers and agencies involved to be transparent with their narrative.”

Ashutosh Harbola, founder of influencer marketing company Buzzoka agrees with that. He further adds that crypto exchange platforms are chasing valuation, and ethics don’t matter when brands are in that race.

A founder of a leading influencer marketing agency says it’s not fair to blame finfluencers when there is a market crash or a company decides to shut operations overnight. “The intent of the content produced by finfluencers is to make investors aware of trends and opportunities. That’s about it. There is a lot of homework done by them before releasing their content piece. It time for all stakeholders to come together and define what is right and wrong way to promote a category like crypto.”

Agencies that Storyboard18 spoke to indicate that crypto brands collectively at the beginning of 2022 had plans to spend between Rs 400 crore and Rs 700 crore on digital marketing. Last year, this number stood at around Rs 800 crore to Rs 1,000. It is too early to estimate if that will drop post the Vauld episode, says a senior media planner. But he indicates that crypto brands will continue to rope in influencers for aggressive marketing push. Depending on the reach and follower count finfluencers get anywhere between Rs 50,000 to Rs 10,00,000 for an Instagram Reel. As per multiple agencies that Storyboard18 spoke to for a full brand campaign they are paid anywhere between Rs 1,00,000 to Rs 50,00,000. Insiders working closely with finfluencers also hint that smaller crypto brands have offered equity stakes to some of them. Some have silently added it to their portfolio, and some have politely refused this offer.

What’s the fix?

Sayali Rai and Niyati Thaker, partners of FinCocktail, a personal finance guide, tell Storyboard18 that they spend significant time researching on brands that approach them for collaborations. They read consumers’ feedback and talk to fellow personal finance experts to make informed decisions. Recently, they have worked with brands Groww, HDFC MF, and Manipal Cigna Health Insurance. Rai and Thaker have also worked with brands CoinDCX and CoinSwitch Kuber in the past and said no to some brands from the category too.

They say, “We think becoming popular is always the aim when you want to be an “influencer” in any category, but instead of focusing on things that “may go viral” we need to focus on what we’re here to do first.” Educational content is critical if creators want to spread financial literacy, believe Rai and Thaker. The right approach is to “Give out disclaimers, tell users that they need to do their research time and again. It’s important. Tell them if you’re not confident about a brand, don’t be shy about it. Also, even Warren Buffett has made bad calls and lost money. Don’t be afraid to showcase your mistakes. Finance is as much art as science, explain Rai and Thaker.

Brand experts think crypto brands will not stop pumping monies into marketing anytime soon. However, the critical aspect is the need to amend crypto guidelines and have clear regulations in place. Harbola agrees with this. “For a dynamic category like crypto, ASCI has to be on its toes and bring amendments to its existing guidelines because the space is ever-evolving. The ad regulator has to empower customers by making it easier for them to report defaulters (influencers/crypto platforms) as well,” he concludes.