03 / 01 / 21

UK’s Top Financial Regulator Warns Crypto Investor They Could Lose Everything

UK’s Top Financial Regulator Warns Crypto Investor They Could Lose Everything

The UK’s Financial Conduct Authority recently issued a warning to investors warning them of the risk of investing in crypto. According to the FCA, investors run the risk of losing 100% of their investment in the crypto sector. The warning comes amidst a boom in the crypto sector that saw the crypto market valuation go above $1 trillion. At its height, BTC, the leading crypto coin by market cap, was selling at over $40K per coin.

Details of the Warning

The warning by the FCA states that the regulator is aware of firms offering UK residents investments linked to crypto assets. These firms often promise investors huge returns in a short period. According to the FCA, if consumers invest in these products, they run the risk of losing everything.

The FCA expressed concern about these high-return investments based on crypto. Their concerns include consumer protection, production complexity, price volatility, charges, charges, and they are promoted.

According to the FCA, some products advertised to consumers might not be subject to its regulation beyond anti-money laundering rules. It also noted that the crypto market was subject to major price volatility. Combined with the complexity of reliably assessing crypto products, consumers were placing themselves at high risk.

The FCA also noted that some of the products offered to consumers were too complex for ordinary people with expertise in the investment world. It noted that even when high returns were promised in crypto, there was no guarantee that those earnings could be converted back into fiat. Its warning noted that converting crypto into cash was dependent on demand and supply. Consequently, they might not find anyone willing to accept crypto currency for fiat.

The warning also talks about fees consumers might incur. These fees were often obscured, which could affect the returns on investment. In some cases, these fees were often higher than those charged on regulated products were. Additionally, it noted that the marketing materials used by these firms often understated the risk to consumers.

The FCA Wants to Protect Consumers

The crypto market is currently on fire. Various altcoins have been giving investors huge returns through speculative investing. However, it is worth noting that the crypto market is highly volatile. For instance, the price of BTC climbed from just around $20,000 towards the end of December 2020 to over $40K at the start of January. Within a few days, it then slid back to around $35K.

FCA’s New Rules on Crypto Derivatives

As part of its effort to protect consumers, the FCA recently issued new rules on crypto investments. The rules state that firms will have to comply with anti-money laundering laws in the UK. Besides that, all

crypto firms will have to register with the FCA when operating in the UK. While these rules could go some way into protecting consumers, it is ultimately up to consumers to conduct due diligence to ensure that they do not lose their investment.

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