Posted 7 months ago | by @devadmin
The U.K.’s Financial Conduct Authority (FCA) has warned that investments and lending products related to crypto come with “very high risks,” CNBC reported.
The FCA has issued previous warnings in the past but the latest comes after Bitcoin reached new highs of over $42,000 last week. The digital asset has since crashed to $33,000 after a sell-off on Monday, which saw $200 billion dollars disappear from the overall crypto market cap.
“The FCA is aware that some firms are offering investments in crypto assets or lending or investments linked to cryptoassets, that promise high returns,” the UK FCA stated, adding:
“If consumers invest in these types of products, they should be prepared to lose all their money.”
The warning wasn’t focused on Bitcoin and Ethereum, however, it was more aimed at advising investors to stay away from high-interest projects, like DeFi yield farms, or other crypto schemes that lure investors with the promise of massive returns. This is because such projects can exit scam or eventually go insolvent unable to pay such high dividends.
“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,” the FCA said.
Laith Khalaf, a financial analyst at investment management firm AJ Bell, told CNBC that the FCA’s warning mentioned inherent risks in cryptoassets.
Khalaf further expressed that the applied to unregulated firms that targeted consumers with marketing material that highlighted the rewards, “but not the potential downside,” of investing in cryptocurrencies.
Khalaf, said: “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.”
The FCA, however, has been working on new regulations for all crypto businesses in the UK to have to register with the agency and the regulator has even recently banned the sale of crypto derivatives to retail investors. “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.”
Ironically the UK regulator’s warning came as Bitcoin crashed more than 25% on Monday wiping out $200 billion from the market. Despite the decline to $30,200, bitcoin is still only at its lowest level since the first day of the new year. This also comes as UK bank HSBC has announced that it won’t allow customers to cash out from exchanges to its bank, effectively blocking crypto transactions.
Bitboy Crypto also recently put out our own warning of a plethora of scams plaguing the cryptocurrency industry, including highlighting one in particular where a user reaches out to a victim claiming to be an influencer stating that they will invest money for them. In this case, we warned that several scammers were impersonating Bitboy Crypto scamming individuals out of thousands of dollars. Watch Ben Armstrong explain in the video below why you should never send anyone crypto promising you returns.
Bitcoin is currently trading at [FIAT: $34,666.69] UP +3.3% in the last 24 hours according to Coingecko at the time of this report.