FCA Warns Crypto Investors May "Lose All of Their Money"

Key Takeaways

• The FCA has posted a warning about the risk of crypto investing, citing price volatility and consumer protection.
• The move coincides with the FCA’s Jan. 10 deadline for unregistered crypto firms to halt trading.
• UK-based crypto firms currently face a “temporary registration” waiting period as the FCA deals with a backlog.

The FCA has warned investors of the risks associated with investing in cryptoassets. Their article references potential dangers, including the lack of protection for consumers and the price volatility of cryptoassets. 

“Prepare to Lose All Your Money”

Great Britain’s Financial Conduct Authority (FCA) has advised consumers to think carefully before investing in digital currencies. 

The regulatory body published an article on their website today, citing the “very high risks” of investing in cryptocurrencies, as well as “investments and lending linked to them,” which might be a reference to DeFi lending protocols such as Aave.

The article includes a succinct message: 

“If consumers invest in these types of product, they should be prepared to lose all their money.” 

The article mentions the speculative nature of crypto investing, which has become a more pertinent theme in recent weeks: currencies like Bitcoin and Ether have helped crypto hit a record high market value of $1 trillion.

Both assets have registered price gains of over 100% in the last month. Bitcoin’s ascent has been particularly well documented: it made headlines for breaking $20,000 on Dec. 16 and has regularly cropped up in mainstream news publications on its way to $42,000, which it hit a few days ago. 

FCA Highlights New AML Regulations

The FCA article lists several key risks, including consumer protection, price volatility, and certain crypto products’ complexity.

It goes into detail to explain how some crypto investments may be less regulated than other asset classes and the difficulties of “cashing out” some assets. High fees and misleading advertising were also mentioned as potential risks. 

The note coincides with the FCA’s deadline for crypto businesses to register under Anti-Money Laundering (AML) regulations. Last year, it was announced that all UK-based crypto-affiliated companies were required to register with the FCA by Dec. 15. If they failed to register, they were required to halt trading and return crypto assets to customers by Dec. 10.

The FCA published their latest guidance today, the day after businesses would be required to cease operations. It advises consumers to withdraw their funds. 

Many companies are now on a “Temporary Registration” list. It’s expected that the FCA will take another six months until their regulatory checks are complete. 

Disclosure: At the time of writing, the author of this feature owned ETH and AAVE, among a number of other cryptocurrencies. 

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