Risks of Investments Advertising High Returns based on Cryptoassets: FCA issues a warning

The Financial Conduct Authority has issued a warning that if consumers invest in cryptoassets, they should be prepared to lose all their money.

Investing in cryptoassets or investments and lending linked to them, generally involves taking very high risks with investors' money, says FCA.

Many cryptoassets promise high returns when investments made, however they come with risks..

It is essential that consumers should make sure they understand:

- what they are investing in

- the risks associated with investing and

- any regulatory protections that apply.

Registration with the FCA

Cryptoassets firms operating in the United Kingdom must be registered with the FCA from 10 January 2021. Operating without such a registration is a criminal offence.

Risks of Investments & Lending through Cryptoassets

1. Some investments may not be subject to regulation beyond anti-money laundering requirements, hence exposing the consumers.

2. Significant price volatility

3. Inherent difficulties of valuing cryptoassets

4. Complexity of some products and services relating to cryptoassets

5. Converting a cryptoasset back to cash depends on demand and supply existing in the market

6. Impact of fee and charges on investments

7. Firms may advertise the returns of products or understate the risks involved

What to do

Read FCA's warning click here

FCA;s Cryptoassets click here

FCA Register click here

FCA's List of Firms with Temporary Registration click here

Cryptoassets: AML/CTF regime: Register with the FCA click here

Dated: 11/01/2021

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