The city watchdog 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 risk were buying in digital currencies for fear of missing out.
In a warning that appeared to target young investors, the Financial Conduct Authority (FCA) warned against buying into the ‘hype’ of cryptocurrencies, especially new celebrity-backed tokens that could end up being false.
“The hype around them generates a powerful fear of missing out on some consumers who may have little understanding of their risks,” said FCA President Charles Randell in a speech prepared for the International Symposium of Cambridge on Economic Crime Monday. “Stories of people who lost savings by being lured into the crypto bubble with illusions of quick wealth, sometimes after listening to their favorite influencers, are ready to betray the trust of their fans for a fee. “
A surprisingly high proportion of consumers who buy speculative cryptocurrencies mistakenly think they are regulated, Randell said. He pointed out 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 money.
“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 American TV star Kardashian West, who was criticized earlier this year for posting a paid promotion of a cryptocurrency token called Ethereum Max in his Instagram Stories, where she asked her 250 million fans, “Are you guys in crypto ???? “. Although the post was marked as an advertisement, Randell said Kardashian did not reveal that the token was created a month earlier by unknown developers.
“Of course, I can’t say if this particular token is a scam,” Randell said. “But social media influencers are regularly paid by crooks to help them pump and dump new tokens on the back of pure speculation. Some influencers promote pieces that just turn out to be non-existent.