FCA Issues Bitcoin And Crypto Warning On Day Price Dives 22
The financial watchdog has warned people putting money in cryptocurrencies like bitcoin - and backing other investments linked to them - that they could lose all their money.
The Financial Conduct Authority said that given the volatility, complexity and lack of regulation of cryptoassets, such investments pose 'high risks' for UK consumers.
Part of its warning involved the unregulated platforms people are using to buy bitcoin.
Its timely warning arrived as bitcoin tumbled by almost a quarter over the past 24 hours, with the slump coming after it hit a peak of $41,962 on Friday.
That peak was hit within a week of it breaching $30,000 for the first time and less than a month after it first broke through the $20,000 mark.
Warning: UK Financial watchdog, autosurf rapide the FCA, said investors in crypto-assets should be prepared to lose all their money
Bitcoin sell-off: The cryptocurrency lost almost a quarter of its value in the last 24 hours
Bitcoin, the world's most popular cryptocurrency, had fallen more than 22 per cent in a day, to slip below $31,000 by 5pm on Monday.
Other cryptocurrencies have also tumbled, with the second most popular cryptocurrency - ethereum - also slipping as much as 25 per cent to around $966.
The sell-off follows a spectacular rise after bitcoin smashed the $20,000 level in mid-December and more than doubled in price in just a month.
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'Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors' money.
If consumers invest in these types of product, they should be prepared to lose all their money.'
It said the complexity of products can make it hard for people to understand the risks, and significant price volatility places consumers at a high risk of losses.
It also warned that some investments advertising high returns based on cryptoassets 'may not be subject to regulation beyond anti-money laundering requirements'.
Bitcoin smashed the $20,000 level in mid-December and more than doubled in a month, surging above $40,000 last weekend
The FCA said that for cryptoasset-related investments, consumers are unlikely to have access to the Financial Ombudsman Service or the Financial Services Compensation Scheme if something goes wrong.
Firms may overstate the returns on products or understate the risks involved, the regulator added.
Even the world's most famous cryptocurrency platform [/money/investing/article-9118141/Coinbase-cryptocurrency-traders-continue-face-frozen-funds-weeks.html Coinbase has been hit by a series of problems] since mid-December, with investors reporting being locked out and unable to buy or sell.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown said the FCA was clearly worried that the 'crypto Wild West' could be running out of control.
Commenting on today's Bitcoin's sell-off, she added: 'There is much speculation that bitcoin will become more mainstream, especially with more institutional investors becoming involved, but the future of cryptocurrencies remains highly uncertain.
'Bitcoin's price is being driven primarily by future price speculation rather than an underlying use-case.'
Boom: The chart shows Bitcoin's performance since its launch in 2014
Laith Khalaf, a financial analyst at AJ Bell, echoed Streeter's comments: 'The regulator is clearly concerned that the high risks already inherent in cryptoassets are being compounded by scam activity, as well as unregulated firms targeting consumers with marketing material that highlights the rewards, but not the potential downside, of investing in cryptoassets.
'You can see how the rapid price appreciation of Bitcoin, combined with aggressive marketing and low interest rates on cash, creates a perfect storm for consumers looking to get a decent return on their money.'
The FCA said people should be wary if they are contacted out of the blue, pressured to invest quickly or promised returns that sound 'too good to be true'.
Firms offering such products should make sure they comply with all relevant regulatory requirements and are authorised by the FCA where this is required.
The FCA said people should be wary if they are contacted out of the blue, pressured to invest quickly or promised returns that sound 'too good to be true'.
Since January 10, all UK cryptoasset firms m[/money/podcast/article-9127191/Are-investors-right-better-times-lockdown-TiM-podcast.html If they are not, consumers should ask the firm whether they are entitled to carry on business without being registered with the FCA.
If it is not, the FCA suggests consumers should withdraw their cryptoassets and/or money.
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