Three EU Regulators Warn Crypto Investors of Potential Losses

Three European Union regulators, the European Banking Authority (EBA), European Securities and Markets Authority (ESMA), and European Insurance and Occupational Pensions Authority (EIOPA), have warned investors in the digital currency ecosystem within the bloc of potential losses inherent in the volatile ecosystem.


The call was accompanied by warnings of the likelihood of the investors losing their money and not having the right to seek any form of help from the government as the digital currency ecosystem has no investor protection laws.

“Consumers face the very real possibility of losing all their invested money if they buy these assets,” the regulators said. “Consumers should be aware of the lack of recourse or protection available to them, as crypto-assets and related products and services typically fall outside existing protection under current EU financial services rules.”

The EU is one of the most prominent hubs for crypto-related activities, with a lot of startups offering services in the ecosystem springing up at a fast pace. The warnings from the watchdogs are notably a way to draw caution from investors and not necessarily a binding order.

“The ESAs note growing consumer activity and interest in crypto-assets, including so-called virtual currencies and the emergence of new types of crypto-assets and related products and services, for instance, so-called non-fungible tokens (NFTs), derivatives with crypto-assets as underlying, unit-linked life insurance policies with crypto assets as underlying and decentralized finance (DeFi) applications, that claim to generate high and or fast returns,” the joint warning added. “The ESAs are concerned that an increasing number of consumers are buying those assets to expect that they will earn a good return without realizing the high risks involved.”

Regulators around the world have been quite concerned about the massive rate of influx into the cryptocurrency ecosystem. While there are notably good digital currencies with good fundamentals and ecosystems, there are also some that scammers operate, but all of these assets exhibit volatility which can generally cause investors to lose funds. This forms the basis of the warning from the EU regulators.

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EU finance chief says digital euro bill coming in early 2023

The European Commission has announced that a bill for a digital euro will be proposed in 2023.

As first reported by Politico, EC finance chief Mairead McGuinness officially disclosed the EU’s formal consideration of digital euro legislation at a fintech conference on Wednesday.

“Our goal is to table legislation in early 2023,” the Commissioner for Financial Service said. “A targeted legislative consultation in the coming weeks.”

The European Central Bank (ECB) is already experimenting with designs and systems for a digital euro, with a prototype expected sometime in late-2023. If a digital euro is to be implemented, it will require the seal of approval from Eurozone governors. If they give the green light, then the digital euro could be ready for issuance by 2025.

The digital euro is a central bank digital currency (CBDC) — a financial instrument that central banks around the world are exploring very seriously. The increased interest in CBDC’s has emerged from growing concerns that domestic currencies will eventually be undermined by the growing popularity of cryptocurrencies.

“If we don’t satisfy this demand, then others will do it,” ECB Executive Board member Fabio Panetta said in mid-November, pushing for the implementation of a digital euro.

Last year, the ECB conducted research and published a report on digital currencies. It found that a digital euro may help lower interest rates, speed up transaction processes and decrease cash use.

Irrespective of the reported benefits, central bankers face an uphill battle to win over the public. Research conducted by the UK economic affairs committee and Germany’s central bank shows that the majority of respondents oppose government-backed digital currencies citing skepticism of benefits and fears of government snooping.

Related: IMF recommends CBDC and global crypto standards for financial stability

But official interest in CBDCs around the world has taken off with Kenya’s central bank recently seeking public input around a digital shilling, while Thailand has already begun implementing regulation for a future retail CBDC. The Central Bank of the Bahamas was one of the first to roll out a CBDC, the Sand Dollar in October 2020.

China however, maintains the first-mover advantage in the world of digital currency. The country has outstripped the international community with continued and significant leaps forward in the CBDC space.