FCA Warns Of Suspicious Cryptocurrecy Companies Promising High Returns

Following the latest bullish developments in the cryptocurrency field, the UK Financial Conduct Authority has warned investors of the potential risks associated with investing in certain digital asset endeavors.

The UK’s regulator has highlighted the risky nature of the industry and said that people should be prepared for worst-case scenarios, including losing all of their money.

UK FCA Warns Investors About Crypto Investing

Although the cryptocurrency market saw vigorous price drops in the past 24 hours, it has been on a bull run led by bitcoin in the past several months. BTC broke above $20,000 for the first time in late 2020, doubled its value once more, reached a new all-time high of $42,000, and most altcoins followed along with impressive results.

These remarkable gains in a relatively short period have led to the creation of numerous firms and projects that promise investors of similarly high returns. However, the UK’s financial watchdog has issued a warning highlighting potential risks, which people tend to forget once there’s a massive bull market.

“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.”

As such, the FCA asserted that investors who want to allocate funds in the cryptocurrency market “should be prepared to lose all their money.”

FCA Building. Source: FinancialTimes
FCA Building. Source: FinancialTimes

Potential Risks Of Investing In Crypto

As CryptoPotato reported before, all cryptocurrency firms operated in the UK have to be registered with the FCA under regulations to tackle money laundering. The watchdog’s warning also touched upon the new rule, saying that if those companies fail to register, their operation will be a criminal offense.

People need to be especially wary of companies contacting them “out of the blue” to pressure them in investing quickly in certain products and promising high returns that “sound too good to be true.”

Some of the concerns associated with such offers include the lack of regulation beyond anti-money laundering requirements, “significant price volatility in cryptoassets,” hard to understand assets, and high fees.

“Customers should be aware of the risks and fully consider whether investing in high-return investments based on cryptoassets is appropriate for them. They should check and carefully consider the cryptoasset business involved.”

It’s also worth noting that the FCA decided to ban the sale, marketing, and distribution for all customers of cryptocurrency derivatives and ETNs as of January 6th, 2021.


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