- An avenue identified by regulators used to promote fraudulent crypto schemes is by paying celebrities and influencers.
- Charles Randell, FCA head called out Kim Kardashian, who recently used her Instagram account of over 250 million followers to speculate the price of a token.
The UK has for some time now paid special attention to crypto-related firms, and allocated funds to educate the youth on the dangers that are likely to be encountered in digital asset investment. It was recently reported that 2.3 million Britons hold cryptos despite their numerous warnings. This has forced the Financial Conduct Authority (FCA) to impose stringent measures against exchanges that are not properly regulated to protect consumers.
An avenue that has been discovered to promote fraudulent crypto schemes is the use of celebrities and influencers. In a speech made at the Cambridge International Symposium on economic crime by the chairman of the FCA Charles Randell, a sound of warning was issued to celebrities who use their influence to promote crypto scams. While speaking about “the risks of token regulations” and “the rules which protect people from investment fraud and scams”, Randell disclosed that the Agency works with online platforms that seek to protect their brands and their consumers. He also cautioned platforms that are not doing this to not betray the trust of their users.
Some social media influencers cannot be trusted
Speaking on this, Randell called out Kim Kardashian, an American media personality, socialite, businesswoman, and model, who recently used her Instagram account of over 250 million followers to speculate the price of a token by announcing to have joined the Ethereum Max community. Randell stated:
… This brings me on to Kim Kardashian. 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.
Though Kardashian had to satisfy the requirement of Instagram rules by mentioning that the post was an Ad, Randell has his concerns.
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 the hundreds of such tokens that fill the crypto-exchanges.
While he admits that it will be difficult to say whether a particular token is a scam, he emphasized that most celebrities or social media influencers are paid by scammers to promote or assist them to pump and dump new tokens through speculation. Interestingly, some of the tokens promoted do not even exist on any exchange according to the FCA head.
These hypes are capable of causing fear of missing out (FOMO) among investors with little experience and knowledge about crypto.
The FCA boss calls for well-considered crafted regulations
Speaking on regulations, Randell mentioned that the decentralized world of digital assets can only be regulated through a regulatory framework that has been crafted through careful thought. He further explained that legislators must put three factors into consideration.
The first is “how to make it harder for digital tokens to be used for financial crimes. The second is “how to support useful innovation”, and the third has to do with “the extent to which consumers should be free to buy unregulated and speculative tokens and take responsibility for their decisions.”
In the meantime, it appears to me that there are two cases where regulators should have the powers to take action to reduce the potential harm to consumers from purely speculative tokens, not least to ensure that trust in the overall technology isn’t destroyed by bad actors in this space.
He explained that the first case which is crypto promotion has to do with a large number of investors buying speculative tokens with the idea that they have been regulated. The other case is the risk of contagion of regulated business of authorized firms by unregulated activities in digital tokens.