FCA director explains why it warned bitcoin and crypto is a risk
After soaring to another record high, the price of cryptocurrency bitcoin plummeted 21% in just two days
After soaring to a record value last week, the price of cryptocurrency bitcoin then plummeted 21 per cent in just two days.
The Financial Conduct Authority this week launched an anti-money laundering register for legitimate cryptocurrency firms.
Here, the regulator’s executive director of enforcement and market oversight Mark Steward explains why Bitcoin and other cryptocurrencies such as Ethereum and Ripple are a risk…
Despite high market prices, cryptoassets such as bitcoin are not linked to any underlying commodity or tangible assets and so most have little or no intrinsic value.
They largely fall outside financial regulation. If things go wrong, you may not be able to claim against the Financial Services Compensation Scheme.
Prices are volatile — prone to extreme swings in price.
Those creating and selling cryptocurrencies do not have to disclose information that might help understand what is driving the changes. Some cryptoasset firms may also be associated with financial crime or money laundering.
Anyone interested in cryptoassets should remember: promises of high profits mean high risks
Firms not listed on the FCA’s full or temporary anti-money laundering registers are breaking the law and must be avoided. It is also important to check that the contact details the firm has given you match our register to avoid fake or clone companies.
There are potential benefits to cryptoassets, such as in cross-border payment services, and the Government is holding a consultation on how these can be harnessed.
But we should be in no doubt there are real risks to these investments.
Anyone interested in cryptoassets should remember: promises of high profits mean high risks.