The Financial Planning Standards Board (FPSB) issued a statement on crypto influencers, digital assets, and retail trading with these assets. Like many other international bodies, the FPSB seems to have anti-digital asset stands or at least one aim at limiting people’s access to this new asset class.
The international organization is in charge of making recommendations and creating standards in financial planning which can be adopted by its members. Many countries, their regulators, and financial entities pay attention to the FPSB to implement new rules or laws.
This time the FPSB claims to have submitted a recommendation to the International Organization of Securities Commissions (IOSCO) Retail Market Conduct Task Force, a global cooperative of securities regulatory agencies. The FPSB asked to “increase efforts” to “protect” investors from cryptocurrencies.
The organization believes the COVID-19 pandemic contributed to “retail market conduct issues”. During this time, people were incentivized to seek assets capable of generating profits, a second revenue stream, or yield in a high inflationary macro-economic environment.
Crypto benefited from this trend probably due to its openness, accessibility, and soaring prices. Data from DeFi Pulse, which tracks the growth in the decentralized finance (DeFi) sector, very popular among retail, indicates a massive growth for these assets from 2020 to late 2021.
In addition to digital assets, crypto influencers, and people using social media to promote a product/platform/token, gained a lot of popularity. The FPSB believes these people are providing “financial advice” without the proper certification.
Thus, the influencers should be or could be “held accountable”. FPSB Head Of Stakeholder Engagement Dante De Gori, CFP, said:
Financial fraud and scams are certainly not new, but the rapid emergence and evolution of crypto assets and other complex digital assets means the level of risk and exposure for retail investors is becoming heightened.
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De Gori claims the fast-changing investment environment, and the emergence of crypto influencers, and digital assets, have left regulation “struggling to keep up”. This translates into alleged “harmful consequences” for retail investors. De Gori added:
FPSB has provided IOSCO with a series of recommendations that we believe will serve retail investors and support IOSCO members efforts to develop regulatory toolkits and other measures to protect retail investor.
The organization recommended affiliated regulators research the “likelihood” of investors experimenting with “catastrophic financial loss”, prevent retail to use their credit cards to purchase cryptocurrency, put influencers in a “sandbox” and create a public register for these individuals.
The FPSB even went as far as to recommend regulators implement a “safe breaker”, a mechanism that would prevent people from purchasing these assets for a certain time, and to ask retail investors to take a “financial knowledge test”. This would determine the person’s capacity to trade with “complex financial products”, such as digital assets.
However, these measures seem to be aimed at stopping people from investing in digital assets rather than protecting them. People are often drawn to the space because of its transparency and accessibility, something traditional markets often lack.
Remains to be seen if any country will adopt the FPSB recommendations.
At the time of writing, the total crypto market cap stands at $1.2 trillion with a 1% loss on the 4-hour chart.