'Be prepared to lose all your money': City watchdog issues stark warning to investors in crypto assets - on the day bitcoin tumbles 22%
- FCA warns of risks of investments promising high returns based on cryptoassets
- It warned over volatility, complexity and lack of regulation of cryptoassets
- Bitcoin fell 22% after hitting a peak of more than $41,000 at the weekend
The financial watchdog has warned people putting money in cryptocurrencies like Bitcoin - and backing other investments linked to them - that they could lose all their money.
The Financial Conduct Authority said that given the volatility, complexity and lack of regulation of cryptoassets, such investments pose 'high risks' for UK consumers. Part of its warning involved the unregulated platforms people are using to buy bitcoin.
Its timely warning arrived as bitcoin tumbled by almost a quarter over the past 24 hours, with the slump coming after it hit a peak of $41,962 on Friday.
That peak was hit within a week of it breaching $30,000 for the first time and less than a month after it first broke through the $20,000 mark.
![Warning: UK Financial watchdog, the FCA, said investors in crypto-assets should be prepared to lose all their money](https://i.dailymail.co.uk/1s/2021/01/11/17/37874342-9135217-image-a-47_1610385951255.jpg)
Warning: UK Financial watchdog, the FCA, said investors in crypto-assets should be prepared to lose all their money
![Bitcoin sell-off: The cryptocurrency lost almost a quarter of its value in the last 24 hours](https://i.dailymail.co.uk/1s/2021/01/11/17/37873196-9135217-Bitcoin_sell_off_The_cryptocurrency_lost_almost_a_quarter_of_its-a-46_1610385575224.jpg)
Bitcoin sell-off: The cryptocurrency lost almost a quarter of its value in the last 24 hours
Bitcoin, the world's most popular cryptocurrency, had fallen more than 22 per cent in a day, to slip below $31,000 by 5pm on Monday.
Other cryptocurrencies have also tumbled, with the second most popular cryptocurrency - ethereum - also slipping as much as 25 per cent to around $966.
The sell-off follows a spectacular rise after bitcoin smashed the $20,000 level in mid-December and more than doubled in price in just a month.
The watchdog said: 'The FCA is aware that some firms are offering investments in cryptoassets, or lending or investments linked to cryptoassets, that promise high returns.
'Investing in cryptoassets, 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.'
It said the complexity of products can make it hard for people to understand the risks, and significant price volatility places consumers at a high risk of losses.
It also warned that some investments advertising high returns based on cryptoassets 'may not be subject to regulation beyond anti-money laundering requirements'.
![Bitcoin smashed the $20,000 level in mid-December and more than doubled in a month, surging above $40,000 last weekend](https://i.dailymail.co.uk/1s/2021/01/11/17/37873200-9135217-Bitcoin_smashed_the_20_000_level_in_mid_December_and_more_than_d-m-2_1610386902713.jpg)
Bitcoin smashed the $20,000 level in mid-December and more than doubled in a month, surging above $40,000 last weekend
The FCA said that for cryptoasset-related investments, consumers are unlikely to have access to the Financial Ombudsman Service or the Financial Services Compensation Scheme if something goes wrong.
Firms may overstate the returns on products or understate the risks involved, the regulator added.
Even the world's most famous cryptocurrency platform Coinbase has been hit by a series of problems since mid-December, with investors reporting being locked out and unable to buy or sell.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown said the FCA was clearly worried that the 'crypto Wild West' could be running out of control.
Commenting on today's Bitcoin's sell-off, she added: 'There is much speculation that bitcoin will become more mainstream, especially with more institutional investors becoming involved, but the future of cryptocurrencies remains highly uncertain.
'Bitcoin’s price is being driven primarily by future price speculation rather than an underlying use-case.'
![Boom: The chart shows Bitcoin's performance since its launch in 2014](https://i.dailymail.co.uk/1s/2021/01/11/17/37873206-9135217-Bitcoim-a-44_1610385562510.jpg)
Boom: The chart shows Bitcoin's performance since its launch in 2014
Laith Khalaf, a financial analyst at AJ Bell, echoed Streeter's comments: 'The regulator is clearly concerned that the high risks already inherent in cryptoassets are being compounded by scam activity, as well as unregulated firms targeting consumers with marketing material that highlights the rewards, but not the potential downside, of investing in cryptoassets.
'You can see how the rapid price appreciation of Bitcoin, combined with aggressive marketing and low interest rates on cash, creates a perfect storm for consumers looking to get a decent return on their money.'
The FCA said people should be wary if they are contacted out of the blue, pressured to invest quickly or promised returns that sound 'too good to be true'.
Firms offering such products should make sure they comply with all relevant regulatory requirements and are authorised by the FCA where this is required.
![The FCA said people should be wary if they are contacted out of the blue, pressured to invest quickly or promised returns that sound 'too good to be true'.](https://i.dailymail.co.uk/1s/2021/01/11/17/37874510-9135217-image-a-48_1610386251016.jpg)
The FCA said people should be wary if they are contacted out of the blue, pressured to invest quickly or promised returns that sound 'too good to be true'.
Since January 10, all UK cryptoasset firms must be registered with the FCA under regulations to tackle money laundering.
The regulator said consumers should check if the firm they are using is on the financial services register here or in the list of firms with temporary registration (file download).
If they are not, consumers should ask the firm whether they are entitled to carry on business without being registered with the FCA.
If it is not, the FCA suggests consumers should withdraw their cryptoassets and/or money.
THIS IS MONEY PODCAST
-
Gold price hits record high - should you invest?
-
What does the latest inflation data mean for our finances?
-
Is being a Nimby really that bad?
-
Have you got the financial confidence to get richer?
-
Can Labour get Britain growing and make us richer?
-
More of us are falling into the savings tax trap - is it fair?
-
Do Labour or the Tories have the plan Britain needs?
-
What does it take to win the Premium Bonds?
-
The consumer champion's tricks to fight back
-
What could the general election mean for your money?
-
The mystery of the stolen Nectar Points - and the loyalty sting
-
Should BofE have cut interest rates instead of holding firm?
-
Mortgage rates are climbing again - should we be worry?
-
Is the UK stock market finally due its moment in the sun?
-
Will inflation fall below 2% and then spike again?
-
Will the state pension ever be means tested - and would you get it?
-
Secrets from an Isa millionaire - how they built a £1m pot
-
Is a 99% mortgage really that bad or a helping hand?
-
How to sort your pension and Isa before the tax year ends
-
Will the Bank of England cut interest rates soon?
-
Was the Budget too little, too late - and will it make you richer?
-
Tale of the state pension underpaid for 20 YEARS
-
Will the Budget cut tax - and the child benefit and 60% traps?
-
Will you be able to afford the retirement you want?
-
Does it matter that the UK is in recession?
-
Why would the Bank of England cut rates this year?
-
You can bag a £10k heat pump discount... would that tempt you?
-
Should you stick cash in Premium Bonds, save or invest?
-
Is the taxman really going after Ebay sellers?
-
What does 2024 hold for investors - and was 2023 a good year?
-
How fast will interest rates fall - and where's the new normal?
-
Is the mortgage crisis over?
-
What drives you mad about going to the shops?
-
Will the Autumn Statement boost your wealth?
-
How to turn your work pension into a moneyspinner
-
Autumn Statement: What would you do if you were Chancellor?
-
Have interest rates finally peaked - and what happens next?
-
How much will frozen income tax bands suck out of your pay?
-
How much further could house prices fall?
-
Will your energy bills rise this winter despite a falling price cap?
-
Have interest rates peaked or will they rise again?
-
Should we keep the triple lock or come up with a better plan?
-
Should we gift every newborn £1,000 to invest?
-
Are you on track for a comfortable retirement?
-
Where would YOU put your money for the next five years?
-
Mortgage mayhem has stalled but what happens next?
-
Taxman customer service troubles and probate problems
-
Energy firms rapped for bad service while making mega profits
-
Inflation eases - what does that mean for mortgage and savers?
-
Could your bank close YOUR current account with little warning?
-
Energy price cap falling and savings rates race past 6%
-
Was hiking rates again the right move or is the Bank in panic mode?
-
Mortgage mayhem, savings frenzy: What on earth is going on?
-
Money for nothing: Is universal basic income a good idea?
-
Inflation-busting savings rates of 9% and cash Isas are back
-
When will energy bills fall, and could fixed tariffs finally return?
-
Should we stop dragging more into tax designed for the rich?
-
How high will interest rates go... and why are they still rising?
-
How can we build the homes we need - and make them better?
-
Home improvements: How to add - or lose - value
-
It's easier to win big on Premium Bonds but should you invest?
-
How long should you fix your mortgage for - and what next?
-
State pension goes above £10,000 - has something got to give?
-
April bill hikes - and is it time we ditched the tax traps?
-
Pensions, childcare, bills and recession: Budget special
-
Can you trust the state pension system after these blunders?
-
Are we on the verge of a house price crash or soft landing?
-
How to make the most of saving and investing in an Isa
-
Why is food inflation so high and are we being ripped off?
-
Could this be the peak for interest rates? What it means for you
-
Will we raise state pension age to 68 sooner than planned?
-
Could an Isa tax raid really cap savings at £100,000?
-
Will you be able to afford the retirement you want?
-
Will 2023 be a better year for our finances... or worse?
-
The big financial events of 2022 and what happens next?
-
Would you be tempted to 'unretire' after quitting work early?
-
When will interest rates stop rising and how will it affect you?
-
Could house prices really fall 20% and how bad would that be?
-
Do you need to worry about tax on savings and investments?
-
Have savings and mortgage rates already peaked?
Most watched Money videos
- Ford revives Capri with new electric SUV priced from £42,075
- Renault revamps its classic car with retro-themed 5 E-Tech EV
- Rolls-Royce's £2m Phantom Scintilla is inspired by Greek marble
- Honda to relaunch one of best-known sports car names in 2025
- Ford Capri name returns but as a sporty electric SUV
- Lamborghini's new Temerario hybrid supercar can exceed 210mph
- Britain's favourite affordable SUV: We take a spin in the new MG HS
- 1992 Ford Escort RS Cosworth used by Jeremy Clarkson to be auctioned
- Step inside new high-security vehicle storage facility near Gatwick
- Vauxhall Frontera to have same price for electric and petrol versions
- The fully edible 'Cake Car' by Skoda Fabia as seen in 2007 advert
- We review the UK's cheapest EV - the £14,995 Dacia Spring
-
Nanoco slashes guidance after losing key European customer
-
RAY MASSEY: A Fabia success story for Skoda
-
Eurozone inflation falls to lowest level in three years -...
-
Jamie Oliver is selling three classic cars from his...
-
House prices fall in August, says Nationwide - but are...
-
Private equity firms braced for shake-up ahead of Autumn...
-
Raspberry Pi could be set for FTSE 250 status less than...
-
Former ITV executive Rufus Radcliffe appointed as new...
-
SMALL CAP MOVERS: Challenger exchange Aquis' party crash
-
MAGGIE PAGANO: Ford slams brake on diversity
-
Confidence in Tesla shares remains thanks to energy...
-
Home REIT offloads over 100 more properties as it winds...
-
Mortgage approvals hit highest level in nearly two years...
-
FIGHTING FUNDS: Put a rocket under your returns
-
MARKET REPORT: Burberry to drop out of FTSE 100 after 14...
-
Let us share our images of thieves says Iceland boss
-
Top US investor slams Britain for lack of tech champions
-
Victoria's Secret back in fashion as show returns