By Rachel Rickard Straus Blitzcoin!
On buses, trains and billboards ... adverts claiming cryptocurrencies will make you rich are everywhere. What they DON’T tell you? You could lose all your money in a flash
FINANCIAL experts are calling for the Government to grant the City regulator powers to control the alarming growth in adverts for high-risk cryptocurrencies. They fear that the adverts, now emblazoned on the sides of buses, street billboards and the walls of travel networks such as London Underground, are giving many unproven cryptocurrencies a veneer of credibility they do not deserve. They are also luring in younger people who don’t realise they are often buying an untested, unregulated and volatile product.
Oonagh McDonald, a former Labour MP, has just written a book on cryptocurrencies and regulation. She believes the Government must permit the
Financial Conduct Authority to police cryptocurrency adverts.
She told The Mail on Sunday: ‘If the Government is serious about robust consumer protection, then it needs to act quickly on this issue. Crypto adverts must be more transparent, providing full details of the company promoting them, including their location and contact details.
‘They must also categorically state – in words people can easily read – that they are not FCA authorised if that is indeed the case.’ McDonald is not a lone voice. Others say it is essential that adverts for cryptocurrencies are regulated as tightly as those for more mainstream (and not as risky) assets such as investment funds.
Cryptocurrencies are a new type of virtual currency bought and sold online. As most are not backed by anything tangible or real, it is hard to identify their value. As a result, prices are volatile with investors usually making extreme losses or massive gains.
They are also unregulated, which means investors have no protection if something goes wrong. The FCA and Bank of England Governor Andrew Bailey have both previously warned that anyone who invests in cryptocurrencies should be prepared to lose all their money. Yet despite these risks, it is all but impossible to take a journey on London’s transport system without encountering an advert for a new cryptocurrency.
For example, a series of adverts for a new cryptocurrency called Floki are currently splashed across buses, trains and even in lifts. The asset is named after the dog of Tesla founder Elon Musk. Floki is unregulated which means that if anything goes wrong, investors have no recourse. The company’s website contains no information about where it is based or who is behind it.
Another advert for Bots promises investors ‘smart algorithms to automate your crypto investing’.
One for cryptocurrency Afrostar asks enticingly: ‘The Next BIG cryptocurrency?’ The only warning in its advert is in small print. McDonald says: ‘This is not good enough.’
Some argue that companies should be able to advertise whatever they please. Furthermore, the adverts do contain a disclaimer in small print stating that cryptocurrency is not regulated and investments can rise and fall in value.
But research from the FCA reveals that seeing adverts for unregulated cryptocurrencies considerably increases someone’s chance of buying them.
In particular, investors who lack knowledge of cryptocurrencies are more likely to be influenced by adverts – and are at greater risk of subsequently regretting deciding to buy.
Susannah Streeter, an analyst at wealth platform Hargreave Lansdown, says: ‘Most firms advertising and selling investments in the crypto Wild West are not regulated. This means that if you invest you will not have the protection of the Financial Services Compensation Scheme if things go wrong.’
She adds: ‘It is also really concerning, given the high risk nature
of these assets, that one in seven people have got into debt to make a purchase.’
Some investment experts fear that by being permitted to advertise alongside regulated financial products, cryptocurrencies are lent an air of legitimacy they do not possess. First-time investors may also conflate the two, thinking that they are investing for their future when, in fact, they are buying an untested, volatile cryptocurrency.
Connor Campbell is a money expert at personal finance website
NerdWallet. He says: ‘The increasing prevalence of cryptocurrency adverts, striking the same tone as those for online investment platforms, have contributed to the rising number of younger people lured in by these high-risk products.’
He adds: ‘From an advertising perspective, more needs to be done to shield younger, inexperienced investors from the high risks associated with cryptocurrencies, It’s essential the tone of these adverts conveys the serious side of investing.’ Experts are staggered by the fact that while cryptocurrencies are riskier than shares, their adverts face far less scrutiny and controls.
This is because they are deemed so risky that they are not regulated as financial products by the Financial Conduct Authority. If regulated, they would face tougher rules.
Holly Mackay, of straight-talking investment website BoringMoney, says advertising rules are more supportive to firms that offer highrisk or gambling products than those that provide more mainstream services. ‘There’s a crazy anomaly that makes it hard for investment providers to advertise what they do, without including so many risk warnings that they put buyers off. Imagine if every time you logged on to book a flight, you were confronted by warnings of crashes or terror attacks.’
She adds: ‘At the same time, my kids are bombarded with adverts for gambling sites while crypto adverts for increasingly spurious offerings are plastered on buses and online.’ Streeter believes that the regulator may have resisted tighter regulation of cryptocurrency as a financial product precisely because to do so would add to their legitimacy. Alex Campbell, head of communications at investment platform Freetrade, believes all adverts for investments should have to adhere to the same standards. He says: ‘With cryptocurrencies fast emerging into the mainstream, it’s important that all investment companies are held to the same advertising standards.’
Andy Russell, chief executive of investment platform Wealthify, advises that anyone considering an investment in a cryptocurrency must do their homework first. He says: ‘We are alarmed by the number of people getting into highly risky investments in pursuit of immediate returns.
‘No investment is without risk. Of course, stock markets go up and down, but with cryptocurrencies the ups and downs are more extreme. It’s therefore imperative that investors do their research and understand the associated risks.’
The Advertising Standards Authority, which oversees advertising, says crypto assets are a ‘key priority’ area. ‘We’re currently conducting proactive monitoring and reviewing a broad body of adverts in this sector,’ it adds.
It said the Floki adverts were among those being investigated.
Earlier this year, the ASA banned an ‘irresponsible’ advert that encouraged inexperienced investors to buy Bitcoin. Cryptocurrency platform Luno told London commuters: ‘If you’re seeing Bitcoin on the underground, it’s time to buy’.
The ASA said the adverts were misleading and omitted essential risk warnings.
Transport for London told the MoS it has written to both the FCA and ASA to ask for ‘clarity’. It added: ‘Cryptocurrency investments is an unregulated industry and TfL ensures that all adverts contain a disclaimer to state this as required by the ASA and the FCA. We also demand a disclaimer stating that the value of investments may fall.’
Floki told the MoS: ‘Regulation is good for the cryptocurrency industry as well as for the financial system.’
Cryptocurrencies: Money, Trust and Regulation, by Oonagh McDonald, costs £25 and can be bought at Amazon.co.uk or Waterstones.com.