According to the head of the UK’s financial watchdog, cryptocurrency ads, particularly those from social media celebrities, should be regulated, citing a recent ad released by Kim Kardashian as an example.
Amateur investors have been drawn to virtual currencies and tokens by the promise of huge profits, but they also run the risk of losing a lot of money or being defrauded.
“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,” said Charles Randell, the chairman of the Financial Conduct Authority (FCA) in the United Kingdom, on Monday.
“That includes rules which protect people from investment fraud and scams.” Kardashian promoted Ethereum Max, a virtual currency, in a story feed on her Instagram account, which has more than 200 million followers, in June.
Ethereum Max, according to Randell, is unrelated to Ethereum, 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 stated.
According to Instagram’s policies, the post was flagged as advertising. “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 made it clear that he had no idea if Ethereum Max was a fraud. “Social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation,” he said.
The FCA has frequently cautioned against the risk of cryptocurrencies, claiming that because the assets are not guaranteed by the UK government’s financial services compensation system, investors might lose all of their money.