28 Apr Kim Kardashian cryptocurrency Instagram advert criticised by UK financial conduct watchdog
The UK’s financial industry regulator has criticised Kim Kardashian West for an Instagram story promoting a cryptocurrency earlier this year, saying it may have been the “single biggest” financial promotion in history.
Kardashian West, who has over 250 million followers on Instagram and reportedly earns up to $1 million (€842,000) per sponsored post on the platform, shared the paid advert for Ethereum Max in June.
“I can’t say whether this particular token is a scam. But social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation,” Financial Conduct Authority (FCA) chair Charles Randell told the Cambridge International Symposium on Economic Crime on Monday.
The price of Ethereum Max – which has no connection to the well-known Ethereum token or its founders – peaked on June 14, the day of Kardashian West’s Instagram advert. It has since fallen in value by roughly ten times.
The regulator warned that the “hype” around cryptocurrencies was leading people with unrealistic expectations to lose money, saying, “if you buy them, you should be prepared to lose all your money.”
“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,” Randell told the Cambridge conference.
Of particular concern to the FCA were the 14 per cent of the UK’s 2.3 million crypto holders who had borrowed money to purchase the tokens, Randell said.
In his speech Randell also called for greater regulation of crypto marketing, saying the “relentless and often misleading advertising” used by some cryptocurrency businesses was leading to consumer confusion.
Randell said any regulation of crypto advertising should cover paid online promotions like Kardashian West’s.
Randell also told the Cambridge conference that regulation of cryptocurrencies themselves was a complex issue.
Cryptocurrencies are not regulated by the FCA. Doing so could pose a variety of challenges, with FCA approval providing a “halo effect” of respectability that could give consumers a false sense of security, Randell said.
The decentralised nature of crypto also poses technical challenges for regulators.
“Any effective system of regulation would require a business seeking registration or authorisation with the FCA to bring itself firmly within our reach, with people and resources that we could access in order to supervise and enforce our requirements,” Randell said.
“We are not going to award FCA registration or authorisation to businesses which won’t explain basic issues, such as who is responsible for key functions or how they are organised.”
Despite fears over the risks cryptocurrencies pose to consumers, any future regulation of the space should allow “the more promising use cases for the innovative technology that underlies the tokens to flourish,” Randell said, highlighting the UK’s “regulatory sandbox” for emerging financial technologies.