UK watchdog says regulating crypto could give it legitimacy
Amid regulations and crackdowns against cryptocurrencies, the Financial Conduct Authority (FCA) of the United Kingdom has warned that regulators must ensure protection for increasing investors and consumers in the crypto sector.
Charles Randell, chair of the FCA, has recently expressed that there is a “real problem” with investors and consumers who have entered into the crypto markets space without being actually aware of the risks.
Randell especially singled out influencers who are making money from paid advertisements of crypto tokens, citing the latest Instagram promotion by Kim Kardashian of EthereumMax (EMAX). The issue with the promotion is that the newest crypto token on the block is sourced to “unknown developers”, and such a massive celebrity personality as Kardashian endorsing it might turn out dangerous for consumers as her socials can transform the advertisement into “the single biggest audience reach in history.”
Although Randell made no direct comments on whether EthereumMax is itself a fraudulent campaign, he pointed that such promotion by high profile influencers and celebrities could mislead potential consumers vastly. Adding social media concepts like FOMO, retail investor hype and more, he claimed, has the potential to the proliferation of large scale crypto-related scams as consumers blindly invest in any unverified resource through trusting influencer advertisements. Such incidence results in substantial financial losses later on.
To make his implied point clearer, Randell has discussed that 2.3 million citizens in the UK currently hold crypto wallets, 14 per cent of them “worryingly” have used their credits to purchase those. 12 per cent of total crypto holders, which is roughly 250,000 Britons, have the assumption that should things go haywire, the FCA or UK’s Financial Services Compensation Scheme would assist.
Currently, the FCA regulates cryptocurrency exchanges, but it has banned the sale of any crypto derivative to retail consumers. He proposed that from now onwards, the FCA must begin with two interventions centred on stablecoins and security tokens as both have the potential to offer “useful new ideas” for cross border transactions.
Both stablecoins and security tokens would also encourage financial infrastructures and financial inclusion. He also argued for a moderate approach in congruence with FCA-regulated entities as it would ensure that token issuers and blockchain firms are transparent. He further outlined the success of the FCA’s regulatory sandbox and its significant role in enabling developers to test their innovations in an insulated environment.
The FCA has been tracking fraudulent crypto assets for a year now, and it has reserved a fund of 11-million-British-pound (~$15 million) for running online marketing promotions and awareness campaigns among 18–30-year-old Britons to educate them about the risks of crypto investments.
Randell observed that further FCA should target misleading crypto businesses and asset promotions and warn Britons against the particular names.