FCA warns against crypto risk following social media posts
The City watchdog has issued another warning on the risks of investing in cryptoassets, following a surge in social media posts promoting such investments.
The Financial Conduct Authority (FCA) issued a statement reminding consumers that it has not been given regulatory oversight over direct investments in cryptoassets and non-fungible tokens (NFTs).
In addition, the FCA pointed out that investments in cryptoassets and NFTs are not protected under the Financial Services Compensation Scheme and investors should be prepared to lose all the money they invest.
It added that those marketing cryptoassets must stick to guidelines set out by the Advertising Standards Authority (ASA) and state that they are not regulated by the FCA.
Read more: Millions of young people take financial advice from influencers
“The ASA has investigated multiple adverts for cryptocurrencies which did not make it clear that the product was not regulated or protected in the UK,” it added.
According to an ASA statement, the agency has issued enforcement notices against more than 50 companies in March advertising cryptocurrencies.
Read more: AML fines drop as regulators turn their attention to crypto
This is not the first time the FCA has warned consumers of the risks of investments advertising high returns based on cryptoassets. It first published a statement in early 2021.
Back in January, the UK government revealed that it would seek to change the law to give the FCA oversight of cryptocurrency promotions, bringing ads under the scope of existing legislation for financial promotions.
Recently, football player Michael Owen came under fire for promoting NFTs and saying that they cannot lose their initial value.
In recent years, crypto-backed lending has become popular in peer-to-peer finance, with several platforms offering loans secured by – or paid in – cryptocurrencies. While this creates many opportunities for investors, it can also carry risks due to the heightened volatility of cryptocurrencies.
For example, the price of Bitcoin was down 26 per cent over one month to £22,849 on 12 May.
Read more: Is crypto-backed P2P lending a flash in the pan?
