The UK Financial Conduct Authority (FCA) has issued a warning on risks associated with cryptocurrency-related investments. The watchdog claims it is "aware" that some firms are offering crypto investments with high returns promises. Such schemes generally involve taking high risks with investors' money, the FCA added.
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"If consumers invest in these types of product, they should be prepared to lose all their money," the statement says.
The watchdog emphasizes cryptocurrency-related investments are not insured by the Financial Services Compensation Scheme nor the Financial Ombudsman Service. The FCA emphasizes crypto investments advertising high returns "may not be subject to regulation" beyond anti-money laundering requirements. The watchdog also says this type of investment is generally associated with significant volatility and product complexity.
In October last year, the FCA banned the sale of crypto derivatives and exchange-traded notes (ETNs) to retail investors. The decision had been made after the research work carried out between July and October 2019. The new regulations came into force on January 6, 2021.
The ban affects companies issuing crypto derivatives, their suppliers, including brokers, investment platforms and financial advisers, companies marketing these products, operators of trading venues and platforms, retail consumers and consumer organizations. The FCA has highlighted that non-regulated stakeholders must also comply with the regulations.
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