Influencers could be committing a criminal offence if they promote financial products that are subject to regulation without approval of an FCA authorised person.
Since October 2023, firms wishing to promote cryptoassets in the UK must be authorised or registered by the FCA or have their marketing approved by an authorised firm.
Promotions must also be clear, fair and not misleading, labelled with prominent risk warnings and must not inappropriately incentivise people to invest.
Susannah Streeter, head of money and markets, Hargreaves Lansdown: ‘’The Financial Conduct Authority has been harnessed with new powers to give consumers extra protection amid the lure of high-risk investments and the crypto Wild West, and it now has influencers in its sights.
Regulators are clearly horrified at the damage superstar celebrities can do to the bank balances of vulnerable consumers, who are influenced by almost every move they make. The delusions of quick riches can spread far too rapidly on social media with speculation amplified by reposts by millions of followers.
The watchdog has been on high alert ever since Kim Kardashian promoted Ethereum Max in 2021 without disclosing to her followers she had received money to do so. Soon after the FCA warned that it may have been the financial promotion with the single biggest audience reach in history, given the huge size of Ms Kardashian’s following, which currently stands at 364 million. She was subsequently fined $1.26 million, by the Securities and Exchange Commission. Ethereum Max has plummeted like a stone from its all-time high in May 2021, and is down 98.7%.
The FCA wants to send out reminders to celebrities and other influencers about the risks they run if they don’t understand the rules. If they promote financial products that are subject to regulation without approval of an FCA authorised person, they may be committing a criminal offence. The Advertising Standards Authority expects influencers to label content as an ad upfront if they get any form of payment, and this must include affiliate links. For high-risk promotions, warnings need to be displayed throughout the promotion and not hidden or obscured by designs or features on a social media platform.
The watchdog is worried that too many financially vulnerable people are being lured into ‘get rich quick’ schemes, with 14% getting into debt during the pandemic to speculate in crypto assets. The FCA has repeatedly warned that investing in crypto currencies is extremely high risk and that speculators risk losing all their money. These fresh warnings from the FCA come as crypto is having its moment in the sun once more, with Bitcoin resurging more than 7% in around 24 hours, heading back above the psychologically important $70,000 mark. It lost ground last week following on from hitting an all-time high of $73,797.68 on March 14. The arrival of spot ETFs on the market has prompted a surge of activity and a growing trend of more institutional investment in Bitcoin. But the US regulator, the SEC has also taken pains to underline the risks associated with the currency and products whose value is tied to crypto.
Bitcoin may have edged more into the mainstream with the approval of these ETFs and increased interest from institutional investors, but it’s still showing all the hall marks of an unpredictable teen, given its volatile temperament. However, you have to keep an eye on it, as its offspring, via blockchain developments, look likely to present opportunities.''
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