When the rising cryptocurrency prices are bringing more and more retail investors towards the asset class, the UK’s Financial Conduct Authority (FCA) has issued a warning against companies offering investment opportunities promising high returns.
Though the general warning did not specify the names of any firms, it targeted the ones offering investments in crypto assets or lending or investments linked to crypto assets.
“Investing in crypto assets, or investments and lending linked to them, generally involves taking very high risks with investors’ money. If consumers invest in these types of product, they should be prepared to lose all their money,” the British regulator stated.
The warning came when Bitcoin is rallying aggressively. The digital currency still remains very volatile as in the last 24-hour, it shed over 13 percent of its value.
The market watchdog also called cryptocurrencies a speculative investment and asked cryptocurrency investors to “understand what they’re investing in, the risks associated with investing, and any regulatory protections that apply.”
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A Risky Investment
The FCA offers a compensation scheme of £85,000 to the traders on the regulated platforms. However, this scheme does not apply to digital assets.
When it comes to cryptocurrency regulations, the United Kingdom remained one of the tough markets. It banned the retail selling of crypto derivatives recently, citing the risks involved with those derivatives instruments.
The FCA also mandated the registration of all cryptocurrency businesses operating within its jurisdictions to register with it. Though it relaxed the approval period of companies already applied for permissions, the legality of un-registered companies ended on January 10.
It is to be noted that the FCA has granted only four crypto companies firms to date: two of which are UK entities of Winklevoss twins-owned crypto exchange, Gemini, and the other two are Archax and Ziglu. Over 90 companies are now awaiting approval as crypto businesses.