The head of the UK’s Financial Conduct Authority on Monday urged investors not to take cryptocurrency advice from social media stars such as Kim Kardashian, as the watchdog considers how to regulate crypto asset promotions.
Charles Randell, chairman of the FCA, said social media influencers who are paid to promote cryptocurrency tokens to their followers are not required to disclose important details of potential crypto investments.
“Social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation. Some influencers promote coins that turn out simply not to exist at all,” Mr Randell said, in a speech delivered at the Cambridge International Symposium on Economic Crime.
He referred to American reality TV star and social media influencer Kim Kardashian, who was recently paid to ask her 250 million Instagram followers to speculate on crypto tokens by “joining the Ethereum Max Community”.
“It may have been the financial promotion with the single biggest audience reach in history,” Mr Randell said.
“In line with Instagram’s rules, she disclosed that this was an #AD. But she didn’t have to disclose that Ethereum Max — not to be confused with Ethereum — was a speculative digital token created a month before by unknown developers — one of hundreds of such tokens that fill the crypto-exchanges.”
While he said he could not confirm “whether this particular token is a scam”, his comments came amid a wider message about the care needed to create a regulatory regime for the decentralised world of crypto assets.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said it was “unusual” to hear the chair of Britain’s financial watchdog dedicate a big chunk of his speech to superstar reality TV queen Ms Kardashian.
“It shows just how concerned the FCA is about the level of financial promotion of crypto assets on social media,” Ms Streeter said.
“The watchdog is clearly horrified at the lack of controls implemented by major social media platforms and has urged them to crackdown on posts which aren’t clearly identified as promotions.”
Britain’s finance ministry has already consulted publicly on whether some crypto asset promotions need regulating.
“There are no assets or real world cashflows underpinning the price of speculative digital tokens, even the better known ones like Bitcoin, and many cannot even boast a scarcity value,” Mr Randell said.
“We simply don’t know when or how this story will end, but — as with any new speculation — it may not end well.”
He said there appeared to be two cases where regulators should have powers to take action: to reduce harm from crypto asset promotions and to stop contagion at authorised firms from unregulated activities in digital tokens.
Scepticism from central bankers about crypto assets is also rife, with European Central Bank President Christine Lagarde warning of the link between crypto assets and money laundering, while Bank of England governor Andrew Bailey told investors to only buy crypto assets “if you’re prepared to lose all your money“.
Updated: September 21st 2021, 6:49 AM