The wild west crypto market poses a real risk to the strength of the UK financial system by allowing fraudsters to conduct widespread money laundering and financial crime.
That’s the warning shot from the City watchdog’s digital tsar, who slammed cryptocurrencies for often harming and exploiting consumers.
Jessica Rusu, chief data, information and intelligence officer at the CDO Exchange for Financial Services, cautioned “cryptocurrencies continue to be high risk for consumers, highly volatile for markets, and highly likely to be used in financial crime.”
The shadowy business structures that are widespread throughout the crypto market has enabled firms to elude the crosshairs of financial regulators.
The Financial Conduct Authority (FCA) recently warned the “decentralised nature” of crypto firms’ corporate structures poses challenges to the FCA’s “traditional approach to interpreting” its regulatory perimeter.
The watchdog has piled pressure on social media giants to strengthen defences against online scam adverts for fraudulent financial products in order to prevent extreme consumer harm. The FCA has also called on the government to include paid advertisements in the Online Safety bill.
Young investors often buy highly volatile crypto assets for irrational reasons such as FOMO, competition with friends or taking investment advice from social media influencers, Rusu warned.
Kim Kardashian recently sent a paid-for post out to her more than 255m followers on Instagram promoting a brand new cryptocurrency token called Ethereum Max.
She highlighted that an alarming number of these fresh consumers don’t “always [have] conventional or rational” reasons for getting involved in crypto markets.
There was little signposting on the post indicating it was a paid advertisement. Kardashian did not mention the token was created by unknown developers just a month before the post.
Volatile crypto markets are luring new, often younger consumers, who “don’t necessarily understand the risks they’re taking,” she added.
Big tech firms recently shirked away questions from the Treasury Committee into how much money they earn from paid-for advertisements for unregulated financial products on their platforms.