Financial Conduct Authority  

FCA sounds alarm bell over high risk cryptoassets

FCA sounds alarm bell over high risk cryptoassets

The City watchdog has warned investors in cryptoassets promising high returns that they must be "prepared to lose all their money". 

In its latest cautionary note against what are often viewed as high risk investments the Financial Conduct Authority today (January 11) said it was aware of some firms offering investments in cryptoassets which "promise high returns".

But the regulator warned investing in these types of product "generally involved taking very high risks with investors' money" and consumers should be prepared to "lose all their money". 

The FCA said: "As with all high-risk, speculative investments, consumers should make sure they understand what they’re investing in, the risks associated with investing, and any regulatory protections that apply."

Investors in cryptoassets are also unlikely to be able to access the Financial Ombudsman Service or Financial Services Compensation Scheme, irrespective of whether a firm has temporary or full registration with the regulator.

The FCA also said consumers should be wary if contacted out of the blue, pressured to invest quickly or promised returns that "sound too good to be true".

Cryptoassets are often synonymous with the darker side of currency with links to criminal activity, but their legitimate use is on the rise. 

But many cryptoassets are well known to be highly speculative and at risk of losing value quickly.

In January last year the FCA became the supervisor for firms carrying our certain cryptoasset activity, specifically overseeing anti money laundering and countering terrorist financing. 

But in an update last month the regulator said it had not been able to assess and register all firms which had applied for registration since then.

It pointed to the "complexity and standard" of the applications received and the pandemic restricting its ability to visit firms as originally planned and urged investors to pull their cryptoassets from firms which had failed to apply for registration within the regulator's deadline. 

The FCA established a temporary registration regime to allow existing cryptoasset firms, which had applied to be registered with the regulator before the deadline of December 16 but whose applications were still being assessed, to continue trading.

rachel.mortimer@ft.com