Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Keeping up with the Kryptocurrencies

Written by Li-Ann Chin, associate
Edited by Kevin Pringle, partner

10 September 2021

Good morning,

For those who don’t remember Fyre Festival: it was the most talked about festival experience of 2017, but not because anyone had any fun there.

On the contrary, the ill-fated Bahamas-based luxury music event never happened. The organisers had paid high-profile personalities, the likes of Kendall Jenner, Bella Hadid and Hailey Baldwin, hundreds of thousands of dollars to promote what was essentially a “scam event” on social media. Three years on, it remains one of the most relevant case studies in the (potentially destructive power) of influencer marketing.

In June this year, reality TV star Kim Kardashian West posted a paid promotion of a cryptocurrency token called Ethereum Max. With approximately 251 million followers on Instagram, the post is likely to have been “the financial promotion with the single biggest audience reach in history.”

And while the Instagram post had been labelled as an #AD, the American media personality had worryingly failed to disclose that Ethereum Max was, at the time, a speculative digital token created a month before by unknown developers.

Charles Randall, chair of the Financial Conduct Authority (FCA), issued a warning to consumers and investors against the risks of buying cryptoassets online. He singled out the example of Kim Kardashian above, citing that influencers are routinely paid a lot of money by scammers to help them pump and dump new tokens on the back of pure speculation, and to promote coins that sometimes don’t even exist.

Research reveals that at least 2.3 million people in the UK currently hold speculative digital tokens, with 14% using credit to buy them. Social media is also particularly prominent amongst the younger generation of retail investors, who have enthusiastically piled into crypto on the say so of influencers online. More than 80% of 18- to 23-year-old survey respondents said social media had influenced their investment decisions.

As much as I felt for the jetsetters who suffered the horror of travelling to the tropical beaches of Bahamas only to be put up in shoddy tents and given warm-limp cheese sandwiches; the silver-lining of the Fyre Festival debacle was that it ignited the debate about influencer ethics and accountability – a debate that is increasingly becoming relevant to financial regulation. The UK Treasury is reportedly considering a proposal to give the FCA a larger role in controlling the promotion of crypto assets under tougher standards that presently apply to marketing traditional financial products.

Will it include policing social media platforms and influencer content? We don’t know. What we do know is that the next decade of financial regulation is set to look very different from the last 10 years. 

News

US president Joe Biden and Chinese leader Xi Jinping spoke in their first phone call in seven months, amid escalating tensions between Washington and Beijing. During the 90-minute call initiated by Biden, the two leaders discussed their shared responsibility to ensure that competition does not “veer into conflict”. Both sides also agreed to maintain frequent contact and to ask working-level teams to increase communications. 

Vaccine passports will be introduced in Scotland for entry into venues with large crowds from 1 October as MSPs in Holyrood voted by 68 to 55 in favour of a Covid-19 certification scheme yesterday, a week after first minister Nicola Sturgeon announced she was intending to introduce this.

Sir Jeffrey Donaldson, leader of Northern Ireland’s Democratic Unionist party threatened to collapse power-sharing arrangements at Stormont “within weeks” unless the Brexit deal for the province is scrapped. Donaldson also announced his party’s immediate withdrawal from cross-border political institutions established for the island of Ireland under the Good Friday Agreement. 

Boats carrying migrants across the English Channel could be turned back from the UK, if personally approved by home secretary Priti Patel. Border authorities have reportedly been authorised to use the new tactic but only in limited circumstances. France is strongly against the plan, citing that it breaks maritime law and accusing the UK of blackmail.  

Business and economy

China announced an unprecedented move to sell oil from its state petroleum reserves, as Beijing increases efforts to rein in inflationary pressures stemming from commodity markets. The State Bureau of Grain and Material Reserves said on Thursday it would release batches of oil for sale to domestic refining and chemical companies to “better stabilise domestic market supply and demand and effectively guarantee national energy security.”

Professional services firm KPMG became the first big business in Britain to set a target for the number of working-class staff. It is aiming for 29% of its partners and directors to come from the social group by 2030. Working class is defined by KPMG has having parents with “routine and manual” jobs, such as plumbers, electricians, butchers and van drivers. Currently, only 23% of its partners across the firm are from working-class backgrounds. (£) 

The UK economy grew by just 0.1% in July as the last of Covid restrictions were lifted in England. It marked the economy’s sixth consecutive month of growth, but the increase was significantly lower than that in June which saw 1% growth. The UK economy remains 2.1% below its pre-pandemic peak. 

Columns of note

Apple often portrays the App Store as the democratisation of software. Since 2008, developers have been able to use Apple’s code to create new smartphone applications for users across the globe. More than a decade later, both the App Store and Google Play are seen as cut-throat monopolies. South Korea recently implemented the world’s first law allowing consumers to bypass tech giants and pay app developers directly – a ruling expected to be similarly enacted in the EU, India and Australia. Brace yourselves. This is just the start of big tech’s app store wars, writes Brooke Masters in the FT.

The rise in national insurance is expected to raise £36bn in the next three years, with the bulk of that sum going to tackle shortfalls in the NHS. Only around £5.4bn is expected to be channelled into social care. Mike Padgham, managing director of Saint Cecilia’s Care Group, writes in The Guardian that Boris Johnson’s much-lauded social care plans, in reality, barely scratches the ongoing crisis in social care that has been decades in the making.  

Cartoon source: @meganjherbert

Markets

What happened yesterday?

London stocks closed out the session in the red on Thursday, as investors digested the news that the European Central Bank as set to lower bond purchases.

The FTSE 100 ended the session 1.01% lower at 7,024.21, and the FTSE 250 was down 0.21% at 23,799.94.

Sterling, on the other hand, was in positive territory, strengthening 0.16% on the dollar to $1.3854 and gaining 0.5% against the euro to change hands at €1.1713.

Wall Street saw out the session yesterday as some better than expected jobless claims data was offset by concerns regarding a rise in new cases of Covid-19. At the close, the Dow Jones was 0.43% weaker at 34,879.38, while the S&P 500 was 0.46% lower at 4,493.28 and the Nasdaq Composite closed the session 0.25% softer at 15,248.25.

In company news 

EasyJet rejected a takeover approach from rival Wizz Air, on the basis of the unsolicited deal being “low premium and highly conditional”.

Costa Coffee boosted its pay by five per cent and announced 2,000 job vacancies as staff shortages hit the UK hospitality sector.

Microsoft scrapped its plans to bring workers back to its US offices on a definitive return date, as a result of uncertainties created by the continued spread of Covid-19.

Oxford Nanopore confirmed a London listing on Thursday which would value the gene sequencing company at the upwards of £2.5 billion. 

What’s happening today?

Finals
Ashmore

Interims
Cip Merchant

AGMs 
Arena Events Group
Br.smaller Cos.
Cip Merchant
Goldstone Resources
Stenprop Limit.

UK Economic Announcements   
(07:00) Industrial Production
(07:00) Manufacturing Production
(07:00) Index of Services
(07:00) Gross Domestic Product
(07:00) Balance of Trade

International Economic Announcements   
(07:00) Consumer Price Index (GER)
(13:30) Producer Price Index (US)
(15:00) Wholesales Inventories (US)

Source: Financial Times

did you know

The Daily Record revealed that Kim Kardashian and indeed, the Kardashian family, are relatives of Highland hero Rob Roy MacGregor and are descended from Scottish Royalty.

Parliamentary highlights

House of Commons

Private Members’ Bills
Various
 
Adjournment
Redevelopment of Kettering General Hospital

House of Lords 

Legislation
Status of Workers Bill [HL] – second reading
Education (Assemblies) Bill [HL] – second reading
Refugees (Family Reunion) Bill [HL] – second reading

Scottish parliament 

No business scheduled.

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