FCA Warn Investors of Crypto Investment Risks Promising High Returns


Shortly after the ban on trading in CFDs on cryptocurrencies came into effect in the UK, the FCA has issued a warning about crypto asset investments promising high returns.

January 11, 2020 | AtoZ Markets – The UK’s financial regulator, the Financial Conduct Authority (FCA), has published a warning about cryptocurrency investment amid a major crash on crypto markets.

FCA warns of risks associated with crypto asset investments

In a January 11 warning, the FCA said that crypto investment and lending are associated with a high level of risk, stressing that investors should be ready to lose all their money while investing in crypto.

The British watchdog further cited a number of risks including price volatility, product complexity, and charges and fees, saying that investors are taking charge of crypto-associated risks:

“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.”

The regulator also stated that crypto investors are unlikely to have access to major consumer protection institutions like the Financial Ombudsman Service or the Financial Services Compensation Scheme if something goes wrong.

The FCA noted that companies offering crypto-related services should make sure that they comply with all relevant regulatory requirements and are authorized by the FCA. Starting from Jan. 10, 2021, all United Kingdom-based crypto asset firms must be registered with the FCA under regulations to tackle money laundering, the agency wrote. “Operating without a registration is a criminal offense,” the FCA added.

Bitcoin dives below $33K

It is worthy of note that on January 6, the FCA’s ban on the sale of crypto derivatives to retail investors came into effect. The authorities intend to regulate the industry by analogy with traditional finance.

Until July 9, 2021, the country has a temporary regime for registering cryptocurrency companies, which allows them to work while the Financial Conduct Authority is considering applications for doing business.

The FCA’s crypto warning comes amid a major drop in the crypto markets. After Bitcoin (BTC) recorded its new all-time high of nearly $42,000 on January 8, BTC  briefly plunged below the $33,000 threshold on January 11. At the time of writing, BTC is trading around $35,380, down about 13% over the past 24 hours, according to data from CoinMarketCap.

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