Just as regulators worldwide are tightening their grip around the cryptocurrency industry, Britain’s top financial watchdog appealed for expanding the scope of regulation in the country, albeit with caution.
The country’s Financial Conduct Authority (FCA) raised an alarm against the risks associated with crypto investments and pointed out the issue of investors delving into the space without due diligence.
In a new speech written for the Cambridge International Symposium on Economic Crime, Charles Randell, Chair of the FCA and Payments Systems Regulator specifically pointed out the role influencers and paid-for promotions play in manipulating users and exposing them to harm, stating,
“A permanent and consistent solution to the problem of online fraud from paid-for advertising requires legislation.”
He singled out the case of Kim Kardashian, who recently did a paid promotion for a relatively unknown currency, Ethereum Max. The regulator pointed out that the developers behind the currency were anonymous and it “may have been the financial promotion with the single biggest audience reach in history,” due to her millions of followers. He used it as an example to highlight how such far-reaching campaigns have the potential to mislead novice investors.
He opined that such endorsements create a mixture of investor hype and FOMO “from some consumers who may have little understanding of their risks.”
Another point of contention for Randell was the risk associated with speculative tokens, highlighting that they are not regulated by the FCA. Nevertheless, around 2.3 million Britons hold such tokens, he mentioned, 14% of whom do it on credit, elevating their risk further. He went on to ask for increased regulation of such offerings, considering 12% of these investors believe they are already protected by the agency in case things go wrong.
Nevertheless, the regulator expressed the need for caution while regulating the space, as heightened overreach could result in innovation being hampered. He also pointed out that since Britons are free to invest in other speculative assets, from gold to Pokemon cards, using unregulated markets, why should digital assets be made an exception. He even went on to say that this might create a “halo effect” that could “raise unrealistic expectations of consumer protection.”
In any case, Randell proposed narrowing down the regulatory focus on stable coins and speculative tokens, while also noting the immense potential both assets have to offer. Moreover, they offer, “encouraging useful new ideas” for cross-border payments, financial infrastructures, and financial inclusion.
To that end, he suggested a moderate approach going forward, one that is in line with existing rules for other entities regulated by the FCA in order to ensure transparency from blockchain firms and service providers. He said,
“Regulators should have the power to take action to reduce the potential harm to consumers from purely speculative tokens, not least to ensure that trust in the overall technology isn’t destroyed by bad actors in this space.”
In addition to these assets, Randell was especially keen on targeting misleading crypto-asset promotions. He said that was “imperative that any regulation of crypto asset promotions requires the risks to be clearly highlighted and does not give the impression that the token itself is subject to regulatory supervision or has regulatory approval.”
Article is taken from another source and not the property of The London Crypto Exchange