Cryptocurrency advertisements, particularly from social media influencers, should face regulation according to the head of Britain’s financial watchdog, who highlighted a recent ad posted by Kim Kardashian.
Virtual currencies and tokens have attracted interest from amateur investors lured by stellar gains but who also risk big losses and being scammed.
“As we live more and more of our lives online, we can’t allow online business to operate in ways we wouldn’t tolerate with any other business,” Charles Randell, head of Britain’s Financial Conduct Authority (FCA), said on Monday.
“That includes rules which protect people from investment fraud and scams.”
Kardashian had advertised virtual token Ethereum Max in June in a story feed on her Instagram account, which has more than 200 million followers.
Randell stressed that Ethereum Max was not connected to Ethereum, which is the world’s second most popular cryptocurrency after bitcoin.
“When she 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,” Randell said.
He noted that the post was flagged as an advertisement in line with Instagram’s rules.
“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.” Randell stressed that he did not know whether Ethereum Max was a scam.
However, he added that: “Social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation.”The FCA has repeatedly warned against the risk of crytocurrencies, arguing that investors can potentially lose all their money because the assets are not backed by the UK government’s financial services compensation scheme.
Kim Kardashian, an American businessman and socialist, has been criticized for promoting cryptocurrency on Instagram.
The criticism came from the chairman of the Financial Conduct Commission (FDA), the UK’s financial regulator.
In advertising for Ethereum Max, Kardashian “told his 250 million followers to guess a cryptocurrency,” said Charles Randall.
Randall called the coin “a speculative digital token created a month ago by unknown developers.”
He accused digital influencers of inciting “rapid wealth illusions”.
Randall spoke about the case during the Cambridge International Symposium on Financial Crimes.
He pointed out that FCA President Kardashian’s Instagram post was properly flagged as an advertisement, which may be “the largest publicly-owned financial advertisement in history”.
The token advertised as Ethereum Max should not be confused with Ethereum Cryptocurrency.
“I can’t say if this is a particular token [Ethereum Max] This is a scam, “said Randall.
“Social media influencers will help scammers reject new tokens by getting paid regularly. Some influencers promote non-existent currencies,” he said.
The BBC approached Ethereum Max and Kim Kardashian for comment, but received no response.
Randall said about 2.3 million Britons currently own cryptocurrencies, and 14% of them borrow, thus “increasing financial loss”.
The FCA has repeatedly warned the British of the dangers of possessing “speculative tokens” that are not regulated by the FCA or covered by any compensation scheme.
“If you buy them, you have to be prepared to lose your money,” he said.
Randall said there is still room to advise consumers that their investments are not protected from “the relentless and often deceptive advertising tactics of some cryptocurrencies.v