Global regulators take aim at crypto, ‘gamification’ of trading
Crypto, gambling-type investments and apps that ‘gamify’ share trading are all in the sights of global securities regulators.
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Crypto, gambling-type investments and apps that “gamify” share trading are all in the sights of global securities regulators as they seek to assess the impact and risk of the boom in retail trading over the past two years.
In an extensive report released on Tuesday, the International Organisation of Securities Commissions (IOSCO) warned of the potential implications and risks posed by the rapidly growing retail army, which burst into markets at a frantic pace at the height of the Covid-19 crisis.
“The ease with which retail investors can access markets and products can create an environment where consumers are less informed, but more exposed,” the regulators said in their report.
“In addition to investing in risky and volatile markets, a majority of retail investors are investing without regulated advice, thus leading to more high-risk investments.”
This, together with the trends for digital brokerages and platforms to promote “gaming-type environments” and processes that benefit from investors’ behavioural trends, is a significant risk, they warned.
Australia’s own securities regulator, the Australian Securities and Investments Commission, which has co-led the recent retail market conduct task-force for IOSCO, warned on some of the dodgy behaviours that could both hit retail investors and diminish market stability.
“This is a worldwide phenomenon, and likely to be an ongoing challenge for regulators and the broader investment community, especially where the harm is digitally-enabled,” said ASIC Commissioner and Task Force co-chair Sean Hughes.
“Like ASIC, our counterparts around the world are observing common types of harmful behaviour, including mis-selling, mis-labelling and misleading disclosure – all of which have the potential to undermine confidence and stability.”
The task-force would allow regulators in different regions to compare experiences and potential solutions, Mr Hughes said.
“Australia’s experience indicates that a flexible and creative use of regulatory tools is important in acting quickly to disrupt misconduct.”
Using social media to promote scams was another growing problem, the regulators warned in their report.
“The increasing influence of social media on retail trading behaviour … was ranked by IOSCO members in survey responses as one of the most important trends affecting retail trading behaviour,'' they said.
“Despite its benefits, social media may allow access to information relating to a variety of products and services, sometimes on a cross-border basis without necessarily being subject to adequate supervision.
“It may also help spread misleading information through internet advertising, influencers, and may result in harmful behaviour and fraud, such as identity thefts.”
A consultation paper on the retail market conduct issues is open until May.
Originally published as Global regulators take aim at crypto, ‘gamification’ of trading
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