Luxembourg warns Investors About Cryptocurrency Investment Risks


Coming the last in the series of the warning from the EU regulators, Luxembourg warns investors about cryptocurrency investment risks. The authority has warned against the volatility of the digital currencies, mentioning that some of the deals are not 100% transparent. 

19 March, AtoZForex The financial regulator of Luxembourg, the Commission de Surveillance du Secteur Financier (CSSF), has issued a warning in relation to the cryptocurrency investments and initial coin offering (ICO) investments.

Luxembourg warns Investors About Cryptocurrency Investment Risks

In its official warning, the CSSF has highlighted that cryptocurrencies have no support from any central bank. The authority has warned against the volatility of the digital currencies, mentioning that some of the deals are not 100% transparent. The CSSF has also noted that numerous of the cryptocurrency business models are incomprehensible.

The CSSF went on to say that the lack of consumer protection is present in the cryptocurrency space. The regulator has also warned about the risk of theft since cryptocurrency exchanges are vulnerable to hack attacks. The Luxembourg watchdog also noted that information about cryptocurrencies is “often incomplete, difficult to understand or does not reflect the risks of cryptocurrencies”.

Following on this, the CSSF has specifically focused on their perceived risks of ICO market investment. According to the authority, the ICO model is lacking verifiable information about the tokens themselves and the funds raised.

EU regulators Warn about ICO Market

Furthermore, the Luxembourg regulator has made it clear that it was not concerned about Blockchain technology apart from cryptocurrencies. The CSSF has stressed that Blockchain “could bring certain advantages in their use in the financial sector and in different innovative projects.”

In fact, numerous other European regulators have been expressing criticism in regards ICOs and cryptocurrencies. Back in fall 2017, the German Federal Financial Supervisory Authority (BaFin) has stated that the purchase of tokens sold in ICO process poses significant risks for investors. The regulator has described ICOs as “highly speculative investments”.

Moreover, during the same period, the main regulator of the European markets, the European Securities and Markets Authority (ESMA) has also cautioned investors about risks of investing in the ICOs.

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