They are gold-plated Hollywood royalty: a pair of Oscar winners whose combined films have grossed over $10 billion at the box office. One is Matt Damon, star of the Bourne films and winner of an Academy Award for 1997’s Good Will Hunting. The other is Wally Pfister, who was Christopher Nolan’s go-to cinematographer and won his Oscar for 2010’s Inception.
And yet Damon and Pfister have pooled their considerable talent to create a… 60-second advert for a cryptocurrency platform.
Cryptocurrency, to the uninitiated, sounds like a plot device from one of Nolan’s baffling science-fiction films. It’s a form of digital currency that investors buy with real money, then trade. Cryptoassets include names you may have heard of, such as Bitcoin, Tether or Cardano, as well as names you probably haven’t, such as Santa Coin, Gummy Beans, DaftCoin and, yes, TITS.
According to the Bank of England, many such assets are “extremely unpredictable – even if you compare them to other unstable assets such as oil”. The sector has been compared to a financial Wild West. Cryptocurrencies can leave people nursing severe financial losses. The reality is clear: sensible investors should tip-toe through crypto.
Yet Damon and Pfister are the latest in a long line of celebrities queueing up to endorse the crypto-system. Reality TV star Kim Kardashian, socialite Paris Hilton and actor Jamie Foxx have also publicised cryptocurrencies or exchanges. Boxer Floyd Mayweather went as far as renaming himself “Floyd Crypto Mayweather” on social media when he publicised two ICOs, or Initial Coin Offerings, to raise money for digital currency launches.
Damon and Pfister’s advert is the most glossy yet: it is for a crypto trading platform called Crypto.com. There is no suggestion that the site is anything but responsible and professional, but the advert – with its tagline “Fortune Favours the Brave” and its CGI images of pioneering mountaineers, aviators and astronauts – does suggest that only losers fail to see the life-changing opportunities that cryptocurrencies present.
“History is filled with almosts. With those who almost adventured. Who almost achieved,” Damon begins, before intimating that only true achievers, presumably people such as the Wright Brothers and Sir Edmund Hillary, “embrace the moment and commit.”
Never mind the idiocy of comparing history’s greatest pioneers to (say) the mystery crypto buyer who reportedly bought £2,500 of the “joke” coin Shiba Inu 14 months ago and is now a billionaire; the Hollywoodisation of cryptocurrencies is a dangerous thing. Celebrity endorsements add a veneer of credibility to a world that’s too often volatile and opaque. The “fortune” that Damon talks about has a clever double meaning: luck, but also riches. And while some people have got rich from crypto, many have not.
The cryptosphere is riddled with cowboys, fraudsters and punters who bet their life savings on a fortune that never materialised. It’s an enticing world in which tokens can plummet in value or, in some cases, simply never existed at all. And it’s a mystifying place about which millions of its own investors admit they don’t have a clue.
Simon Kingsnorth is the CEO of marketing specialists Simon Kingsnorth Consulting, and author of the book Digital Marketing Strategy. He has worked with leading financial companies such as Citibank and RBS, and he believes that celebrities endorsing crypto businesses is a “potentially very risky thing to be doing”.
“One of the things that celebrities and any influencer of any scale has to remember,” Kingsnorth says, “is that the people who follow them fundamentally trust them. They believe in them, they look up to them, they aspire to be like them. So anything they say is going to be taken as gospel by a good percentage of their followers. ‘I endorse this product.’ ‘OK, great – let’s go and play with it.’”
A recent survey in America by the market-research company Morning Consult found that 45 per cent of crypto-holding respondents would be likely to buy a digital asset if it was endorsed by a celebrity. But – and here’s the obvious rub – the same trust can’t be guaranteed when it comes to currencies themselves.
And while celebrities could absorb a financial hit, your average investor might struggle. “With someone such as Matt Damon or Kim Kardashian,” Kingsnorth says, “if they lose a million dollars on cryptocurrency – no big deal. It’s not good, but it’s not the end of the world. Whereas their followers – some of those guys, if they lose £100 or £1,000, that’s a significant problem.” (As part of the tie-up, Crypto.com made a $1 million donation to Damon’s Water.org non-profit organisation, which demonstrates the kind of money involved.)
Tokens of unknown provenance can hoodwink investors. Damon and Kardashian’s projects may be reputable, but other celebrities and social-media influencers are regularly paid by scammers to “pump and dump” new tokens. It can be the financial equivalent of the emperor’s new clothes: we’re told that only clever people can see them while stupid people can’t, meaning that no one wants to admit that they might be hokum. There are no concrete assets or real-life cashflows backing these things: this could be a huge bubble. And we all know what bubbles do once they’re pumped with too much air.
And Kardashian’s recent dabble in crypto raised eyebrows. In September the 41-year-old was criticised by the head of the Financial Conduct Authority for accepting money to promote an untested cryptocurrency on Instagram back in June. “Are you guys into crypto?” the reality TV star had asked her 250 million followers, before talking about a token called Ethereum Max.
The FCA’s Charles Randell, a former corporate lawyer who was awarded a CBE for services to financial stability, used a speech to accuse Kardashian of asking her quarter of a billion followers to “speculate on crypto tokens”. He said Ethereum Max had been “created a month before, by unknown developers”, and he accused influencers of fuelling “the delusions of quick riches”.
Randell stressed that he couldn’t say whether the token in question was a scam or not. But he said Kardashian’s post, which had been correctly flagged as an ad, may have been the “financial promotion with the biggest single audience reach in history”. (He added that the token was not to be confused with the well-known Ethereum cryptocurrency.)
The FCA boss wasn’t exaggerating about Kardashian’s reach. The celebrity has more Instagram followers than the populations of Britain, France, Italy and Spain combined. Twenty-one per cent of all American adults were estimated to have seen her post. But in the weeks following Kardashian’s ad, the value of Ethereum Max fell again, burning many investors. The tokens are currently trading at $0.00000004436 (that’s seven zeros) according to the website Coinmarketcap.com, whereas in June following her ad, they had been trading at $0.00000017 (that’s six zeros).
Despite all this, cryptocurrencies remain popular. A June report by the FCA found that 2.3 million British consumers hold cryptocurrency, equivalent to 4.4 per cent of all adults or one in every 23 people. That number alone is staggering. It means that for every full Routemaster you sit on, three fellow passengers are investors in crypto. Of those, one in seven holders uses credit to buy their tokens. And the FCA found that “the level of understanding of cryptocurrencies is declining, suggesting that some crypto users may not fully understand what they are buying”.
Their research also found that while 90 per cent of crypto users identified the correct definition of cryptocurrency, only 58 per cent agreed with the statement “I believe I have a good understanding of how cryptocurrencies and the underlying technology works.” In other words, 42 per cent of crypto holders admitted to not really grasping it. And 10 per cent couldn’t even define a cryptocurrency, even though they’d invested their hard-earned (or borrowed) cash in them. You don’t need a CBE in financial stability to see how wild this is.
There was more. Consumers who are persuaded by crypto adverts are much more likely to regret their purchase, the FCA found. They’re also more likely to wrongly believe that they have regulatory protection – they don’t.
The FCA’s concern is shared across the Atlantic. The chair of America’s Securities and Exchange Commission, Gary Gensler, has said he’s not against investing in cryptocurrency per se. He warned in the summer, however, that the crypto market is fertile ground for fraud and manipulation. It’s a place where people struggle to get clear and complete information. He likened it to the Wild West.
And yet the high-profile endorsements keep coming. The chairman of the Advertising Standards Council of India recently warned celebrities to do their due diligence prior to endorsing cryptocurrencies, after a spate of high-profile ads during an India-Pakistan cricket game at the T20 World Cup.
So what’s the answer? Regulation. It sounds dull, but for investors to trust cryptocurrencies, they need protection from the cowboys. And for this to happen, the industry needs to be regulated just as banks or stockbrokers. Adverts need disclaimers. Violators need be punished.
Regulation does exist, and increasingly so, but it remains patchy and inconsistent. In America, for example, the SEC typically views cryptocurrency as a security, the Commodity Futures Trading Commission tends to call it a commodity, and the Treasury calls it a currency. Crypto exchanges in the US are regulated by the Bank Secrecy Act, must register with the Financial Crimes Enforcement Network, and must comply with anti-money laundering and anti-financing terrorism obligations. In the UK, cryptocurrency is seen as legal property, but not legal tender. Exchanges here must register with the FCA.
A UK trade association called CryptoUK requires all of its members to subscribe to a Code of Conduct. Rules include operating honestly with customers, being transparent, and checking that investors are fit and proper to undertake transactions. A spokesperson says CryptoUK “firmly” believes the industry should be regulated, but “in a fair and balanced way that both protects the consumer [and] allows for the crypto industry to compete fairly.”
A spokesperson for Crypto.com says the company is “focused on building a secure and regulated platform in every market where we operate”. The company says it’s focused on “upholding the highest security and compliance standards – including the industry’s largest insurance policy of $750 million”.
Earlier this year, Crypto.com became the first global crypto platform to receive a Virtual Financial Asset (VFA) license and an Electronic Money Institution (EMI) license in Europe, adding to a growing list of licenses. On the new advert, the spokesperson said the company “found alignment with Matt Damon and Water.org on several important values including financial independence and self-determination”.
Kris Marszalek, the co-founder and CEO of Crypto.com, claimed last week that the Damon campaign coincides “with the early stages of mainstream adoption of cryptocurrency”. But until a clear global regulatory framework exists, and people fully understand what they’re buying, experts say celebrities should keep their distance.
“Celebrities and the influencers just should not touch this stuff,” says Kingsnorth. “It’s far too risky,” says Kingsnorth. “It’s certainly irresponsible with financial services, where you can literally ruin people’s lives at scale.”
And elsewhere in the industry, there are evident scams. Just this week, the Gizmodo website reported that a crypto-coin named after Netflix’s wildly popular Squid Game series, called Squid, turned out to be a so-called “rug pull”. This is when a coin’s creators sell lots of currency before cashing out their tokens for real money and scarpering. The Squid scammers – who’d gone to great lengths to replicate the show’s modish iconography on their website – made off with $3.4 million of investors’ money. (Gizmodo said the currency was an obvious hoax from the start, because investors could buy the coins but not sell them.)
The scam was a cruel twist on the TV drama’s central riff of desperate debtors having to kill each other for the chance of making money. But it just shows the lure of popular culture to gullible investors. Someone, somewhere, is laughing.