A group of six prominent United States Senators is prompting Meta Platforms, the social media company headed by Mark Zuckerberg, to disclose its procedures to deal with crypto scammers within its platforms.
This coalition is being led by Senator Bob Menendez (D) and counts on the support of the Chairman of the legislative body’s Banking Committee, Sherrod Brown, along with other prominent members of Congress including Senator Elizabeth Warren and Bernie Sanders.
In the letter that addressed Zuckerberg directly, the Senators requested specific details about “Meta’s efforts to combat cryptocurrency scams on its social media platforms, including Facebook, Instagram, and WhatsApp”.
The group cited a study from the Federal Trade Commission (FTC) that revealed a 49% increase in the number of fraud reports received by the agency from 1 January 2021 to 31 March 2022.
These scams produced losses of approximately $417 million to the public and primarily consisted of investment scams and romance scams. A large portion of the criminal activity took place on a social media website with Instagram accounting for more than a quarter of the incidents.
In the letter, the Senators told Zuckerberg that his company’s actions reveal that they are aware of the growing threat of crypto scams as indicated by its decision to ban adverts for initial coin offerings (ICO).
The seven questions made to Zuckerberg seek further details about the firm’s policies and practices to identify and ban scammers from its social media platforms, how the system flags adverts that could be crypto scams, and how the company deals with reports of crypto scams made by users.
House Members Sought Similar Answers from Crypto Exchanges
In a similar move, the House Committee on Oversight and Reform sent letters to five crypto exchanges last week to ask how they were combatting crypto scams and protecting the public from fraudulent schemes in this space.
The Committee cited a similar FTC report that pointed to 46,000 investors losing approximately $1 billion in crypto scams with 70% of the incidents reportedly involving Bitcoin (BTC).
The rising popularity of digital assets, the decentralized nature of the blockchain, and the lack of proper regulation have contributed to attracting criminals to the space as they have managed to get away with most of their crimes in past years.
However, prominent incidents such as the debacle of the Terra ecosystem – an event that caused losses exceeding $60 billion for both individual and institutional investors – and the bankruptcy of several crypto platforms and exchanges including the Celsius Network and Voyager Digital have prompted regulators to take action to protect the public from further pain.
Who Will Oversee Cryptos in the US is Still Yet to be Determined
Efforts still seem a bit disorganized in the US in particular as regulatory agencies such as the Securities and Exchange Commission (SEC) have opted to unilaterally designate crypto assets as investment securities – a term that allows them to prosecute fraudsters by relying on the stipulations of the country’s securities laws.
Meanwhile, the Commodity Futures Trading Commission (CFTC) has been deemed by some legislators as the appropriate institution to oversee this up-and-coming market but no law has been passed yet that gives it such authority.
In addition, certain states have opted to enforce their own rules to protect investors from being defrauded. Recently, California’s legislators presented a bill to the state’s Governor, Gavin Newsom, that requires crypto firms to obtain a license to offer digital assets and crypto-related services to the public.
Among the requirements that the law introduces to grant such a license, stablecoin issuers must prove that their digital assets are fully backed by liquid reserves while companies and individuals who fail to comply with the stipulations of the bill could be fined with up to $100,000 per day.
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