Bitcoin Crash: FCA Issues Cryptoasset Investment Warning

Consumers should be prepared to “lose all their money” if they invest heavily in crypto, the watchdog said.

The UK’s financial watchdog issued a statement on Monday warning prospective investors about the risks of putting their money towards cryptoassets such as Bitcoin.

The Financial Conduct Authority (FCA) encouraged customers to understand the financial risks of cryptoassets and schemes involving them prior to investing, given that they were unlikely to be protected under the financial services compensation scheme or the financial ombudsman service, which help UK investors reclaim their money when a company collapses.

“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, noting also that some crypto investment firms may be overstating the potential payouts of cryptoassets or understating the risks involved.

“Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money,” the organisation continued. “If consumers invest in these types of product, they should be prepared to lose all their money.”

Bitcoin has experienced an unprecedented 300% rally since October 2020, reaching new milestones regularly in the final weeks of 2020 through to the new year. Last week, the cryptocurrency’s total value passed $1 trillion for the first time in history.

Analysts’ warnings of an overdue price correction came to fruition over the weekend as Bitcoin underwent its sharpest two-day fall in nine months, falling as much as 21% down to $32,389 before stabilising around the $35,650 mark on Monday (around 12% down from its $41,000 high).

In addition to its warning for investors, the FCA issued a reminder to firms that new rules which came into force on Sunday now require crypto companies to register with the organisation and carry out money laundering checks.

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