Financial regulators came under pressure from MPs yesterday to stop firms using words such as “invest” and “investment” when promoting cryptocurrencies.
MPs on the Treasury select committee told Nikhil Rathi, chief executive of the Financial Conduct Authority, that even the health warnings in the small print of adverts risked giving the products undeserved credibility.
“The words ‘your investment’ endorse the idea that this is an investment on a par with a FTSE 100 company or a unit trust,” Harriett Baldwin, Conservative MP for West Worcestershire and a former banker with JP Morgan, said.
Rathi said he was expecting to get new powers over the promotion of cryptocurrencies. “We’ll have a discussion about what the wording should be,” he said. The FCA had in the past worked with the Advertising Standards Authority to clamp down on financial wording seen as unfair, unclear or misleading.
Charles Randell, chairman of the FCA, described his concern about some of the messages he saw on the side of London buses, but until the regulator got new powers, there was not much he could do. He had written to the chairman of Transport for London, offering help.
Rathi also revealed that the FCA was considering explicitly announcing that no compensation from the Financial Services Compensation Scheme would ever be paid to anyone losing money in crypto. Clear lines were needed, he said. “Personally, I would suggest we simply say that anything crypto-related should not be entitled to compensation, so that consumers are clear about that when they are investing.”
About 2.3 million people in Britain own cryptocurrencies, according to the FCA.
Asked whether cryptocurrencies were the 21st-century version of the Dutch tulip bulb market bubble, Rathi said some of them had “no intrinsic value” and “anyone who invests in them must be prepared to lose all their money”.
Baldwin also accused the FCA of helping criminals. “Your website actually publishes a list of unregistered crypto asset businesses for anti-money laundering purposes. It’s meant to be helpful but it could also be helpful to someone who just wants to launder money,” she said.
Rathi said the aim was to alert consumers to be cautious about using those firms, but conceded the information could be useful to criminals.