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Crypto investors could “lose all their money,” according to a UK regulator

Cryptocurrency prices may be on the rise, and Bitcoin (BTCUSD) may be gaining traction among institutional investors, but the Financial Conduct Authority (FCA) of the United Kingdom is still skeptical about cryptoassets as a safe investment.

Consumers should “be prepared to lose all of their money” if they invest in cryptocurrencies or investments connected to them, according to the Financial Conduct Authority, which regulates financial markets in the United Kingdom. The FCA noted on its website that “investing in cryptoassets, or investments and lending linked to them, often involves assuming very significant risks with investors’ money.”

TAKEAWAYS IMPORTANT

Consumers in the United Kingdom have been advised that they could lose all of their money if they invest in bitcoin, according to the Financial Conduct Authority of the United Kingdom.

Before investing in crypto assets, customers should check for registration of crypto trading firms, according to the regulator.
Bitcoin and cryptocurrency values have risen to new highs in the last month, owing to increasing interest and encouraging pronouncements from institutional investors about their prospects. Retail investors have reportedly began investing in cryptocurrencies in order to profit from the boom, according to some publications.

Investing in Cryptocurrencies Comes With Risks
Consumers face five dangers when investing in cryptocurrencies, according to the FCA. For starters, because cryptocurrencies are unregulated, consumers may not be sufficiently safeguarded from investors touting big returns on the asset class. Second, the tremendous volatility of cryptocurrency prices puts users at danger of losing money. Third, the technical underpinnings of cryptocurrencies make concepts and hazards associated with cryptocurrency investing difficult to grasp for non-technical people. The agency warned, “There is no certainty that cryptoassets can be converted back into cash.”

The FCA also cautioned investors about the potential for excessive charges and fees when investing in cryptocurrencies. This is mostly due to the lack of cryptocurrency regulation, according to the agency. Finally, the regulator warned investors about the risks of crypto-related investment returns. The regulator stated that “firms… may understate the dangers involved.”

This isn’t the first time the agency has issued a cautionary statement about cryptocurrency. During the previous bull market in 2017, the FCA was outspoken in its opposition to initial coin offers (ICOs) and cryptocurrency-related online trading schemes. “ICOs are extremely high-risk, speculative investments,” according to the regulator. “You should be aware of the hazards… and be prepared to lose your entire investment.” It also asked banks to keep an eye on their customers who engage in crypto-related activities and take stern measures against them.

A Problem of Regulation

Despite advances in infrastructure and liquidity, the agency’s cautions about the risks associated with cryptocurrencies serve as a reminder of the markets’ fundamental fragility. The regulator’s actions were prompted by concerns that “the high risks already inherent in cryptoassets are being compounded by scam activity, as well as unregulated firms targeting consumers with marketing material that highlights the rewards, but not the potential downside, of investing in cryptoassets,” according to Laith Khalaf, a financial analyst with AJ Bell.

Cryptocurrencies are still subject to dramatic price swings, with prices frequently rising and falling in the double digits in a single day. Despite the cautious vote of confidence from investors, the lack of effective regulation continues to be a sore point in the growing ecosystem.

The Financial Conduct Authority (FCA) has advised investors to check if the crypto investment firm with whom they are dealing is registered with them. (In December of last year, the agency established a temporary registration scheme for crypto trading firms.) “If they aren’t, the FCA advises customers to withdraw their cryptoassets and/or money,” according to the agency’s website.

What do you think?

Written by Trevanna Gordon

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