TL;DR Breakdown
- FCA warns crypto investors of investment-associated risks
- Regulators highlight concerns bordering them
The UK Financial Conduct Authority (FCA) has sounded a note of warning to crypto investors on their investment risks. The FCA classes risks related to crypto investment as ‘very high’.
The FCA warned that before staking in crypto businesses, investors must be ready to forego their investments, and even profits.
The FCA hammered on to crypto investors that investments are highly volatile, and not usually insured by regulators like the Financial Service Compensation Scheme.
Risks regulators warn crypto investors against crypto investments
The UK regulators categorically highlighted five concerns bordering them as regards high-return crypto investments.
The regulators listed consumer protection stating that several firms advertising returns on crypto assets are not regulated beyond anti-money laundering policies.
The regulators highlighted price volatility as another factor investors should be afraid of, noting that volatile prices and difficulties in valuing crypto assets reliably put the consumer in a position of losing investments.
Product complexity, charge fees, and marketing materials are other risks the regulators asked investors to be wary of.
Product complexities and crypto asset services can make it difficult for consumers to understand the risks the regulators warned about.
In October 2019, the FCA placed a ban on the sale of crypto derivatives and exchange-traded notes (ETNs) to retail investors to reduce these risks. Enforcing of this regulation has begun last week.
The embargo affects firms that issue crypto derivatives, their suppliers including brokers, among others.
The risks FCA warned against highlighted five concerns bordering them as regards profit on products they have invested in.
The regulators listed consumer protection, price volatility, product complexity, and marketing materials as what investors are to look out for.
