| Fears rise over how unregulated trading and promotion of crypto assets are creating a new
generation of addicts
Crypto firms launched a record-breaking promotional push in London last year, targeting millions
of commuters with 40,000 adverts on billboards, at tube stations, in carriages and across the side of double decker buses.
relatively obscure names such as Hex, Kraken and Puglife about whom consumers know little, if anything.
Meanwhile, football clubs and players, not to
mention globally recognised celebrities, tout crypto investments on a daily basis via social media.
This week, reality TV star Kim Kardashian West and
boxer Floyd Mayweather Jr were named in a lawsuit alleging that they helped promote crypto firm EthereumMax, as it made false and misleading
statements that left investors nursing heavy losses.
An Instagram post about EthereumMax, to Kardashians 250 million followers, may have been the
most widely seen financial promotion of all time, according to the head of the UKs Financial Conduct Authority (FCA).
Yet despite their
ascendancy, cryptoassets remain unregulated in the UK, pending a Treasury review. That means that the FCA, the UKs financial regulator, has very limited
powers to influence how the industry takes people's money and what it does with it.
Players wishing to dip their feet into the crypto world should note
a large difference in regulation between trading companies that also offer traditional financial instruments, and those that offer crypto coins and tokens
only. The later has no protection for your money where as the former has segregated funds by law.
Cryptoasset executives do not have to prove that they
are fit and proper people to take peoples money. The companies they run are not required to hold enough cash to repay investors if they go bust. Nor must
they worry about the FCAs stipulation that financial promotions, such as those splashed across public transport in London, are fair, clear and not
In the ongoing the marketing blitz, the Advertising Standards Authority is the only watchdog that has taken any meaningful action. It is
investigating one advert by the cryptocurrency Floki Inu and has already banned one for Luno Money.
The campaign, which told the public its
time to buy bitcoin, was found to be misleading and irresponsible for encouraging people to invest in unregulated financial products.
such as Floki are known as meme coins because they are launched quickly with branding that responds to popular cultural phenomena. Floki Inu is a meme
coin cryptocurrency named after a dog owned by Elon Musk.
The ASA (Advertising Standards Authority) launched the investigation after receiving
complaints about Flokis latest campaign. Missed Doge? Get Floki, was the ad campaign using the companys cartoon dog logo.
investigation, which was first reported by the Financial Times, comes days after Liberal Democrat and Green party members of the London assembly called on TfL
to stop taking advertising from cryptocurrency-related firms until the UK government and Financial Conduct Authority set out new guidance on
However in the complete absense of oversight, experts fear that cautionary tales of addiction are being drowned out by powerful,
overwhelmingly positive messages.
As bitcoin slumped towards the end of 2021 and into 2022, having reached all-time highs just weeks earlier, the
Twitter account of smartphone trading app eToro remained doggedly optimistic.
Is bitcoin on its way to a new high?, it asked, as the slide
began. Weve seen bitcoin rally before. But could this be the one to take it to the MOON?"
Its a very strategic marketing
ploy, says Dr Anna Lembke, one of the worlds foremost addiction experts, professor of psychiatry at Stanford University School of Medicine and
author of the book Dopamine Nation. Theyre encouraging you to amplify the wins and ignore the losses, creating a false impression there are more
Asked about this, eToro says that it is committed to helping retail investors engage with each other and foster an environment of
learning and collaboration, adding that its platform is not gamified.
The company said it also provides educational tools, performs
know-your-customer checks and encourages long-term, diversified investing.
Dr Anna Lembke is concerned by the potential for the social media element to
fuel compulsive behaviour in crypto trading, an activity she says bears the hallmarks of addictive gambling products but without the acknowledged risk.
When you mix social media with financial platforms, you make a new drug thats even more potent, she says.
Social media posts pushing
crypto frequently refer to Fomo the fear of missing out fuelling an urge to participate. You get this herd mentality where people talk to
each other about what the market is doing, they have wins together, losses together,
an intense shared emotional experience. We get a little
spike in dopamine, followed by a little deficit that has us looking to recreate that state. This, she says, echoes characteristics of gambling but with a
Its less stigmatised, she says. It has this socially sanctioned status as something that maverick smart
people do. Parallels with gambling are impossible to ignore.
GamCare, which runs the National Gambling Helpline, said it fields about 20 calls a
week related to crypto. Callers reported trading for 16 hours a day, making huge losses and struggling to cope with the guilt. As with gambling, where every
one addict is estimated to harm seven other people, many were suffering at the hands of someone elses habit.
GamCare has even dealt with young
patients who bought digital coins in a desperate attempt to make enough money to get on to the property ladder, only to lose life-changing sums.
Castle Craig residential treatment clinic in Scotland, a private residential drug and alcohol rehabilitation clinic, the first crypto addict arrived at the
clinic in 2016, followed by more than 100 since then. Tony Marini, the senior specialist therapist at the clinic and a recovering gambling addict himself said,
Its tenfold already since 2016, so whats it going to be like in the next five years?