Investors in crypto assets must be aware they could lose all their investors, the U.K.’s Financial Conduct Authority warned on Monday.
It said that cryptocurrencies come with “very high risks”, warning that investors who lose their hard-earned money on it “are unlikely to have access to the Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS) if something goes wrong”.
The warning came amid volatility in the crypto market; at least $200 billion in total were reported wiped off on Monday when the values of Bitcoins and other cryptocurrencies plummeted on Monday.
Before Monday’s plunge, Bitcoin surged to new records last week, climbing as high as $41,973.
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Investors increasingly view the digital asset as a hedge against inflation — similar to gold — in times of unprecedented stimulus from governments.
However, the UK financial regulator warned, “The FCA is aware that some firms are offering investments in cryptoassets, or lending or investments linked to cryptoassets, that promise high returns.
“If consumers invest in these types of product, they should be prepared to lose all their money.”
The FCA, which has banned the sale of crypto derivatives to retail investors as part of tougher crypto control, introduced a new register for cryptoasset businesses, warned that firms operating without registration are committing a “criminal offence.”
“As with all high-risk, speculative investments, consumers should make sure they understand what they’re investing in, the risks associated with investing, and any regulatory protections that apply.
“For cryptoasset-related investments, consumers are unlikely to have access to the Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS) if something goes wrong.
“Consumers should be wary if they’re contacted out of the blue, pressured to invest quickly or promised returns that sound too good to be true,” the FCA further said.
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