FCA chair Charles Randell had a go at getting down with the kids in a speech today aimed as a caution against speculative crypto trading.
Overlooking Randell’s opening remarks about Hercules cleaning up the Augean stables, the head of the City watchdog quickly sprinkled more contemporary pop-culture including references to Kim Kardashian and Pokemon trading cards.
Randell described a recent social media campaign fronted by Kardashian, in which she asked her 250mln Instagram followers to ‘join the Ethereum Max community’, as potentially “the financial promotion with the single biggest audience reach in history”.
The watchdog highlighted that Kardashian complied with Instagram’s advertising rules, but didn’t properly disclose that Ethereum Max wasn’t the same thing as the popular Ethereum cryptocurrency nor did she disclose that it was a ‘speculative token’.
“Of course, I can’t say whether this particular token is a scam,” Randall 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.”
“At the FCA we have repeatedly warned about the risks of holding speculative tokens. To be clear: these tokens are not regulated by the FCA. They are not covered by the Financial Services Compensation Scheme.
“If you buy them, you should be prepared to lose all your money.”
In the published draft of his speech, planned for the Cambridge International Symposium on Economic Crime later today, he noted that the FCA currently has only a limited role in regards to crypto – as it registers UK-based cryptoasset exchanges for anti-money laundering purposes and it has a list of unregistered crypto exchanges “that we suspect are operating in the UK”, to help consumers avoid using them.
At the same time though, he warned UK banks and authorised firms to be very wary of transactions involving unregulated crypto exchanges wherever they are based.
“We don’t currently have a general remit from Parliament to regulate the issue or promotion of speculative tokens. Should we?
“There is a live debate in many major financial jurisdictions about whether regulators need more powers and tools and clarity of remit to regulate crypto.
“It’s difficult for regulators around the world to stand by and watch people, sometimes very vulnerable people, putting their financial futures in jeopardy, based on disinformation and fear of missing out.”
Randall meanwhile noted that the FCA doesn’t regulate other asset classes which are frequently traded by speculators such as gold and other commodities, foreign real estate, foreign currencies – he also adds Pokemon cards to this list – and claimed that by regulating speculative crypto tokens the FCA could potentially risk creating a ‘halo effect’ that could create unrealistic expectations of consumer protection.
“It will take a great deal of careful thought to craft a regulatory regime which will be effective in the decentralised world of digital tokens,” he later adds.
“We also have to recognise that effective regulation of a digital world requires international cooperation and common standards.”
What exactly is the FCA’s position on crypto then? Evidently it is not that clear.
Perhaps, as crypto-evangelists would argue, it is not very relevant what the centralised regulatory bodies think about the decentralised financial systems of the future.
There again, a crypto-head reaching toward sci-fi is perhaps as predictable as the head of the City regulator drawing on ancient Greek classics for analogy when speaking to his Cambridge University audience.