With Cryptocurrencies gaining popularity within pop culture, it wasn’t long before social media sensation, Kim Kardashian, posted her first crypto endorsement on Instagram. Kardashian’s Instagram boasts an impressive 251 million followers, which made for an excellent reach for the crypto company that she was promoting. However, since the post was made public, UK regulator City Watchdog has called out the star for her endorsement.
Social media influencers, such as Kim, have audiences that include millions of young adults and teens. The City Watchdog has recently issued a warning, following the Instagram post, against the risks of buying crypto-assets promoted by the likes of Kim Kardashian. The regulator explained that those who are prompted to buy into the currency by these paid promotions are buying due to FOMO (fear of missing out) and often have little understanding of the risks involved with trading crypto.
The Financial Conduct Authority (FCA) has cautioned against following the ‘hype’ of buying into cryptocurrencies, especially new tokens backed by celebrities that may end up being fake.
“The hype around them generates a powerful fear of missing out from some consumers who may have little understanding of their risks,” the FCA chair, Charles Randell, said in a speech prepared for the Cambridge International Symposium on Economic Crime on Monday. “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.”- Carles Randell, FCA Chair.
A big part of the problem is that many consumers wrongly believe that speculative cryptocurrencies are regulated, so will buy into them willingly. Randell stressed that consumers will have no financial protection when they buy into cryptocurrencies and will not have any access to a financial compensation scheme if they lose all of their investments.
Randell made it very clear that “if you buy them (cryptocurrencies), you should be prepared to lose all of your money.”
Kim Kardashian’s earlier crypto promotion was brought up in Randell’s speech as an excellent example of how celebrity crypto endorsements aren’t always reliable.
Kardashian promoted Etheruem Max to her Instagram stories earlier this year. Kardashian made sure to mark her posts as an advertisement however, she failed to tell her 250 million fans that the crypto was only created 1 month prior to her post, by unknown developers.
Randell explained that, while there is no evidence that this was a scam, many celebrities and influencers are paid by scammers to help them “pump and dump new tokens on the back of pure speculation.” Many of the coins promoted by influencers do not exist at all.
Randell has called for greater powers to govern the promotion of crypto assets that happens online. This is in a bid to combat the problematic content that leaves many unknowing social media users buying into scams without any realisation. Randell believes that stricter policing of online crypto promotions will make it harder for digital tokens to be used for financial crime.
