The UK Financial Conduct Authority (FCA) has warned consumers about the risks of investing in cryptocurrencies today. However, this isn’t scary, but rather an acknowledgement of the risks that exist in the industry.
The 5 major concerns are listed below
In its warning, the FCA listed five main risks and concerns related to “high-yielding investments based on crypto assets, ” including:
- Consumer protection,
- Price volatility,
- Product complexity,
- Fees and charges, and
- Marketing materials.
First, the FCA is reminding the public that certain digital assets (including those that are expected to generate high returns) may not be subject to anti-money laundering requirements. This means that consumer safety cannot be guaranteed, just like in the crypto world.
The regulator continued, “The price of crypto assets fluctuates significantly with the inherent difficulty of reliably valuing crypto assets, which puts consumers at high risk of loss.”
Today the price of Bitcoin has fallen by almost 20%, which is difficult to argue.
The FCA pointed out that the risks associated with cryptocurrencies are high, which is known due to a large number of scams, hacks, bugs and experimental techniques in the industry.
“Investing in, or related investments and borrowing, crypto assets is usually associated with high risk to investors’ money. When consumers invest in these types of products, they should be prepared to lose all of their money,” the regulator warned.
The FCA noted that digital assets are typically complex technical products and that it is difficult for consumers to understand the potential complexity. The regulator added that there is no guarantee that any given crypto will be at least easily converted back into cash as it depends on supply and demand.
Finally, the various fees and charges may not be obvious at first glance, and the marketing materials that accompany certain digital assets may be excessive.
“Consumers should be aware of the risks and thoroughly evaluate whether investments based on high-yielding encrypted assets investments are suitable for them. They should study and carefully examine the related encrypted assets business,” concluded FCA.
