Investors need protection from sketchy cryptocurrency schemes, especially those being promoted online by paid influencers in “pump and dump” maneuvers, Financial Conduct Authority Chairman Charles Randell said in an address at the Cambridge International Symposium on Economic Crime.
Randell outlined the challenges and risks involved, warning that many U.K. consumers don’t realize that cryptocurrency investments are unprotected, volatile and could result in people losing everything invested with no recourse. Crypto prices can bounce up and down for no reason, making huge losses possible.
“It’s difficult for regulators around the world to stand by and watch people, sometimes very vulnerable people, putting their financial futures in jeopardy, based on disinformation and fear of missing out,” Randell said.
The watchdog chair specifically singled out Kim Kardashian’s promotion of the token Ethereum Max. She created an Instagram ad alerting her 250 million followers about the token.
“… it may have been the financial promotion with the single biggest audience reach in history,” Randell said. “In line with Instagram’s rules, she disclosed that this was an #AD. But she didn’t have to disclose that EthereumMax — 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.”
Some 2.3 million people in the U.K. have invested in cryptocurrency, and 12% — about 250,000 Brits — think they are protected by the FCA, Randell said, pointing t0 FCA research. One step toward transparency is mandating that promotions of tokens and coins clearly state that there is no FCA protection at all.
“One thing is clear: because of the decentralized way that these speculative tokens are created, any effective system of regulation would require a business seeking registration or authorization with the FCA to bring itself firmly within our reach, with people and resources that we could access in order to supervise and enforce our requirements,” Randell said in the speech.