UK Regulator: Be Prepared to Lose Your Entire Investment if You Invest in Crypto

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U.K.’s Financial Conduct Authority stated that a cryptocurrency investment could go to zero.

Cyrpto-investing comes with “very high risks.” At this point in its life cycle, it is a speculative asset. “The FCA is aware that some firms are offering investments in cryptoassets, or lending or investments linked to cryptoassets, that promise high returns,” the regulator said.

With any asset, there is substantial risk. However, this regulator wanted to emphasize that the risk with cryptocurrency is even larger. “If consumers invest in these types of product, they should be prepared to lose all their money.” It is not uncommon for cryptocurrencies to experience extreme volatility with massive price swings. In recent weeks, Bitcoin fell around 20 percent, eliminating hundreds of billions in market capitalization.

In the past year alone, Bitcoin's value has increased 300 percent. There has been speculation that the massive appreciation is a market bubble that could pop at any moment. “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,” Laith Khalaf, a financial analyst at AJ Bell, said.

“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. “For cryptoasset-related investments, consumers are unlikely to have access to the Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS) if something goes wrong,” it added.

“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.”

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