Last Updated on January 16, 2021 by admin
The British market regulator warned on the 11th that if consumers invest in crypto-asset products that promise high returns (such as Bitcoin), they should be prepared to “lose all their money.”
The British Financial Conduct Authority (FCA) urges consumers to understand their investment content and the financial risks involved, because they are unlikely to be protected by the UK’s plan, that is, the government helps investors recover cash when a company goes bankrupt.
FCA stated that some cryptocurrency investment companies may have overestimated potential expenditures or underestimated risks.
Take Bitcoin as an example. The price of the cryptocurrency doubled in less than a month, soaring to more than $40,000. Since then, the price of Bitcoin has dropped to about $35,000.
The regulator said on the 11th: “The FCA is aware that some companies are offering investments in crypto assets, or loans or investments related to crypto assets, and these investments are expected to bring high returns.”
“Investing in crypto assets, or related investments and loans, usually involves taking very high risks with investors’ funds. If consumers invest in such products, they should be prepared to lose all their money.”
Investors will not be able to rely on the services of the Financial Ombudsman to resolve complaints or seek compensation from companies that violate the regulations. The financial services compensation plan is also unlikely to cover investors. The plan covers fully regulated accounts and investment products including pensions, up to 85,000 pounds of losses.
FCA stated that the complexity of certain services and products related to encrypted assets makes it difficult for consumers to understand all risks. There is no guarantee that encrypted assets can be converted back to cash, leaving consumers at the mercy of market supply and demand.
FCA added that “the large fluctuations in the price of encrypted assets, coupled with the inherent difficulties in the valuation of encrypted assets” put consumers at a high risk of loss.