FCA issues warning against cryptocurrency investment and use
According to the statement, the focus of the warning was mainly towards crypto-assets and businesses promising high returns. The warning included the FCA stating that the consumers should be prepared to “lose all their money”.
According to the notice:
“Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money. If consumers invest in these types of product, they should be prepared to lose all their money. “
Cryptocurrencies have been the boogeyman for the traditional financial authorities, however, the risk warning even within the crypto ecosystem has been clear.
For instance, the largest cryptocurrency Bitcoin had garnered the attention of everyone from the mainstream to the crypto ecosystem as it reached new price levels every day. However, on Sunday, the value of BTC dropped from $41k to as low as $32k. This massive drop has not been witnessed in the BTC market for a long time. This volatile nature of the crypto market has been time and again highlighted.
The FCA thus warned that any issues faced by crypto investors within the country may not be assessed by the Financial Ombudsman Service, which settles complaints between consumers and businesses that provide financial services.
Apart from consumer protection and price volatility, it highlighted other risks associated with “high-return investment based on crypto assets” like product complexity, charges and fees, and marketing material. It added:
“Consumers should be aware of the risks and fully consider whether investing in high-return investments based on cryptoassets is appropriate for them. They should check and carefully consider the cryptoasset business involved.”
Earlier the regulatory body had noted that all the crypto firms based in the country will have to be registered with the FCA in order to comply with regulations. This was stated to be done by 10 January 2021 and operation without registration will be illegal and deemed a criminal offense.