Cryptocurrencies: regulator’s warning

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Yesterday, 11th January, the Financial Conduct Authority (the UK’s financial regulator) issued a warning to consumers about the risks of investments which promise high returns based on underlying crypto assets.

The warning used very uncomplicated language: “Investing in crypto-assets, 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.” 

The full press-release of the warning is available here: https://www.fca.org.uk/news/news-stories/fca-warns-consumers-risks-investments-advertising-high-returns-based-cryptoassets

The most common cryptocurrency is Bitcoin which over recent months has enjoyed a spectacular price surge. However, by coincidence, the same day the regulator issued it’s ‘be prepared to lose it all’ warning, the volatile nature of crypto assets was highlighted again as Bitcoin dropped 28% during the day.

At Investment & Retirement Solutions Ltd we’ve become a little concerned about the FOMO effect – the Fear Of Missing Out, which could be encouraging retail investors to take inappropriate action, the consequences of which they don’t understand.

We reiterate the Financial Conduct Authority’s warning that purchasing cryptocurrency exposes an individual to the risk of a total loss and we would remind cryptocurrency purchasers that if they find themselves out of pocket they would be unlikely to be able to rely on the Financial Ombudsman Service to settle complaints or to order compensation from offending firms. Consumers are also unlikely to be covered under the Financial Services Compensation Scheme, which covers losses up to £85,000 on fully regulated accounts and investment products including pensions.

We’ll ask for some feedback when we speak with clients and if there is the demand, we’ll publish an educational article which discusses how cryptocurrencies work.

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Our posts are intended as financial education and financial information, not as financial advice, and are only suitable for UK residents. Always take professional, independent advice before acting on any information.

Investment & Retirement Solutions Ltd is authorised & regulated by the Financial Conduct Authority.

The value of investments and income from them can fluctuate (this may partially be the result of exchange rate fluctuations) and investors may get back less than the amount invested. Past performance is not a guide to future performance.

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