The chair of the City watchdog has warned investors not to take cryptocurrency advice from Kim Kardashian and other social media influencers.
Charles Randell warned social media influencers, who are paid to promote cryptocurrency tokens to their followers, do not need to disclose important details of potential crypto investments and could be advertising scams.
“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,” he said at the Cambridge international symposium on economic crime.
“Kim Kardashian… was recently paid to ask her 250 million Instagram followers to speculate on crypto tokens by ’joining the Ethereum Max Community,” Randell said, a token which was created just a month before the post.
Randell also fired a warning shot at the cryptocurrency industry, signalling it could soon come under greater regulatory scrutiny.
In the speech, he raised the prospect of the financial watchdog bringing the creation and trading of cryptocurrency tokens under its scope.
“The potential level of consumer harm that these purely speculative tokens bring raises the question of whether the activity of creating and selling the tokens themselves should be brought within FCA regulation.”
“These tokens have only been around for a few years, so we haven’t seen what will happen over a full financial cycle,” Randell said.
Randell urged consumers to conduct thorough research before making any decision on purchasing crypto assets.
He also stressed the FCA needs to step up communications to ensure more consumers are aware cryptocurrencies are not regulated and are not entitled to use the Financial Compensation Scheme to recover investors’ losses.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “The FCA is singing from the same song sheet as many other international regulators. It sees investing in crypto currencies as extremely high risk.”
“The watchdog had already been quick to warn investors that they could risk losing all their money if they indulge in crypto currency trading.”
The FCA has recently intensified its crackdown on crypto exchanges, distributing a warning to consumers about using the crypto trading platform Binance.
The regulator cited concerns over Binance’s internal controls inability to prevent money laundering activity on its platforms.
Randell pointed to the decentralised nature of cryptocurrency exchanges offering opportunities for criminals to conduct financial crime.
“Exchanges can be used to launder the proceeds of crime and we must contribute to the global effort to address financial crime by demanding that businesses with a UK presence meet the necessary standards.”
He also highlighted the difficulty in overseeing cryptocurrency exchanges due to their opaque ownership structure.