EU Regulator ESMA Cryptocurrency Risks Warning


Today, the primary EU financial markets regulator, European Securities and Markets Authority, has issued EU Regulator ESMA Cryptocurrency Risks Warning for investors across the economic union.

12 February, AtoZForex The European Supervisory Authorities (ESAs) for securities (ESMA), banking (EBA) and insurance and pensions (EIOPA) have made an announcement today for consumers. The group has warned customers in regards to the risks of buying cryptocurrencies.

EU Regulator ESMA Cryptocurrency Risks Warning

The official announcement on the website of ESMA states:

“The ESAs are concerned that an increasing number of consumers are buying VCs unaware of the risks involved. VCs such as Bitcoin, are subject to extreme price volatility and have shown clear signs of a pricing bubble and consumers buying VCs should be aware that there is a high risk that they will lose a large amount, or even all, of the money invested.”

The authorities further add that virtual currencies and cryptocurrency exchanges are not regulated under the EU law. This implies that consumers buying cryptocurrencies are not protected by any of the authorities. For instance, in case a cryptocurrency exchange goes out of business or users have their funds stolen due to the cyber attack, there is no existing EU law that would cover their losses.

Some of the cryptocurrency exchanges have been subject to operational problems, the regulator mentions. Furthermore, during these issues, consumers have been unable to trade cryptocurrencies when they intended to do so. Thus, according to the regulator, many of them have suffered losses due to the price fluctuations.

ESMA ICO Warning

The ESMA further states that this warning is based on Article 9(3) of the three ESAs’ founding Regulations. It also serves as a message following the statement by the EU regulator from November 2017 about ICO risks.

That time, ESMA has warned investors over risks tied to initial coin offerings (ICOs). ESMA has released two statements, one is related to ICOs risks and another one is guidance for companies using ICOs as a fundraising tool.

The European watchdog has observed a rapid growth in ICOs globally. According to ESMA, ICOs are risky and highly speculative and investors ran a “high risk of losing all of their invested capital”. Additionally, firms using ICOs, meanwhile, may conduct their activities without complying with relevant applicable EU legislation, the watchdog said.

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