Why crypto risks are no laughing matter

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Fans of Larry David, look away now. The famously waspish comedian has finally sold out – to a crypto-trading platform, no less. The co-creator of Seinfeld is currently starring in a wry advert for a firm called FTX, which debuted during the half-time commercial break for the Super Bowl, America’s biggest sporting fixture.

In it, Mr David travels through time scoffing at various inventions that ultimately changed the world, like the wheel and the light bulb, until the present day, when he dismisses cryptocurrency: “I’m never wrong about this stuff. Never.”

Larry, what were you thinking? I’m sure the money was very attractive (especially as it was paid to you in real dollars) and the advert isn’t entirely unamusing. Heck, you didn’t even have to endorse FTX or the concept of cryptocurrency itself explicitly – your long-time collaborator, Jeff Schaffer, confirmed in several interviews that neither of you has a clue about this stuff.

Schaffer said the reason you both did it was because you thought it would be funny. He told The Hollywood Reporter he “didn’t give three sh**s” about the ethics of promoting cryptocurrency. Fair enough, I guess. But some of your fans had rather hoped for your morally bankrupt persona in Curb Your Enthusiasm was fictional.

Tie-ups between sitcom actors and financial brands are nothing new: think of TSB’s adverts featuring David Schwimmer (Ross from Friends), or Richard Ayoade (Moss from The IT Crowd) working with HSBC.

I’m skeptical about how effective these partnerships are: much as I love both Ross and Moss, they’d never make me think any better of these brands or influence my banking choices. But I don’t think they do that much harm either.

It’s a different story when it comes to celebrities promoting cryptoassets and other kinds of high-risk financial products. The Financial Conduct Authority (FCA) has suggested that as many as a third of people who have bought cryptocurrencies in recent times did so in response to advertising. Yet the Cryptoassets Taskforce has found that crypto promotions are “not typically fair or clear and can be misleading”.

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It also found that people who buy into cryptocurrencies after seeing advertising were less likely to understand the risks involved, such as the lack of regulation and high level of volatility, and more likely to regret their decision.

In other words, cryptocurrency adverts use unscrupulous methods to entice financially illiterate people to invest in something they don’t understand…and they often lose money as a result. There is something quite sordid about accepting a big check to support that and not caring about the repercussions, don’t you think?

What’s even more galling is that the A-listers who have shilled for crypto – not just Mr David but the likes of Matt Damon, Alec Baldwin, Jamie Foxx and Kim Kardashian – have all held forth on liberal causes in their time, from progressive tax to law reform.

But moral authority isn’t just earned through your films, TV shows or naked photoshoots. It’s earned by saying no to offers that enrich you while potentially immiserating others.

The Government has promised to authorize the FCA to crack down on crypto adverts, so they come with the same robust risk warnings as other financial promotions and are targeted only at sophisticated/high net worth investors. That could stop crypto-trading brands like eToro being plastered all over Premier League football shirts and using referral schemes to drum up more business.

Cryptocurrency adverts use unscrupulous methods to entice financially illiterate people to invest in something they don’t understand…and they often lose money as a result

Legislation will be tabled “when Parliamentary time allows”. Given the current political distractions, the crypto salesmen have still got a nice big window of opportunity ahead of them. They’ll be further emboldened by the Government’s refusal to compel social media platforms and search engines to remove misleading ads and scams as part of the Online Safety Bill.

Even if all this tough-sounding regulation was already in place, I have no idea how the FCA would police this boundless online universe, swarming with thousands of international firms with opaque structures, when it can’t even stop authorized firms based solely in the UK making dodgy claims and flogging unregulated products.

The Treasury is also consulting on how to stop people self-certifying as sophisticated investors to access high-risk financial products. It’s all-too easy to lie in an online questionnaire about how much you earn and how much you know. But short of making potential investors sit an exam, it’s hard to envisage a regime that would be acceptable to profit-hungry firms while genuinely sorting the clued-up from the clueless.

The crypto gold rush may have a long way to run yet, with plenty more celebrities willing to join in if the price is right and the advertising concepts are funny. But if – or when – things eventually go wrong, ordinary investors definitely won’t be laughing.

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