FCA is finding it risky to invest due to the complexity of some cryptocurrency-linked products, those who find troublesome any investment may not receive any help nor support coming from the government.
The UK Financial Conduct Authority (FCA) issued a warning to investors earlier today. The warning goes about some companies that guard a close relationship with bitcoin as well as other cryptocurrencies that offer high profits and are operating without a license. “Operating without registration is a criminal offense,” they clarified in the warning statement.
The FCA warning also relates to the implementation of new regulatory requirements in the UK that happened this week. Now any company that offers services with crypto assets must show registration and its proper approval. This advice intends to create a preventive behavior that can help in the fight against money laundering. “Those unregistered companies or those who do not register will receive a criminal treat”, the FCA reported in the statement.
The Decline in the Prices of Bitcoin and the Risks attached to this event
After the recent decline and sudden drop in bitcoin prices, the risks the investors run when they turn their eyes to crypto-assets or in some financial tool linked to it can be a major worry, or can also be a highlight.
“As with all high-risk speculative investments, consumers should ensure they understand what they are investing in, the risks associated with the investment, and the regulatory protections that are in place,” the statement said. They point out that those who invest in this kind of product should be aware of the fact that they can lose the entire investment. FCA also indicates to consumers that it is “unlikely” that they will receive some kind of help from the Financial Ombudsman Service or the Financial Services Compensation Plan in case the investors face problems with their investments in crypto assets. The main recommendation is to keep checking the official Crypto Assets Guides.
What are the FCA Concerns?
There are several concerns regarding investments in crypto assets that the FCA is worrying about. One is related to some investments that are promising “high returns” with a base on cryptocurrencies that are not tied to regulations that could go far beyond the anti-money laundering requirements.
Another factor that raises concerns among the regulator is by fart the “complexity” of some products and services that are too close to crypto actives, mainly because this relationship between those product/services and crypto-actives may create difficulties for consumers to be aware of all the risks of investment.
Similarly, for the FCA, fees happen to be higher than even the same investment products under regulation. They believe that companies that share involvement with cryptocurrencies have more probabilities of exaggerating profits thanks to a set of marketing campaigns. According to a regulation that took place in 2020, derivatives sales as options, futures, and listed notes “that refer to transferable crypto assets that are not under regulation by companies with active operation in or from the United Kingdom” is forbidden.
By: Jenson Nuñez