The City watchdog has issued a warning about the risks of buying crypto assets promoted by social media influencers such as Kim Kardashian West, and said people with little understanding of the risks were buying into digital currencies for fear of missing out.
In a warning that appeared to be targeting younger investors, the Financial Conduct Authority (FCA) cautioned against buying into the “hype” of cryptocurrencies, particularly new tokens backed by celebrities that may end up being fake.
“The hype around them generates a powerful fear of missing out from some consumers who may have little understanding of their risks,” the FCA chair, Charles Randell, said in a speech prepared for the Cambridge International Symposium on Economic Crime on Monday. “There is no shortage of stories of people who have lost savings by being lured into the crypto bubble with delusions of quick riches, sometimes after listening to their favourite influencers, ready to betray their fans’ trust for a fee.”
A surprisingly large proportion of consumers who buy into speculative cryptocurrencies wrongly believe they are regulated, Randell said. He stressed that consumers have no financial protection if they invest in cryptocurrencies and will not have access to their Financial Services Compensation Scheme if they lose their cash.
“If you buy them, you should be prepared to lose all your money,” Randell said, repeating an earlier warning from the FCA.
In his speech, Randell cited the example of the US TV star Kardashian West, who earlier this year was criticised for posting a paid promotion of a cryptocurrency token called Ethereum Max to her Instagram stories, where she asked her 250 million fans: “Are you guys into crypto????”. While the post was marked as an advertisement, Randell said Kardashian did not disclose that the token was created only a month earlier by unknown developers.
“Of course, I can’t say whether this particular token is a scam,” Randell said. “But 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.”
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