Here’s why the UK financial regulator said crypto investors can “lose all their money”

The regulator issued the warning shortly after crypto markets took a hit on Monday.

No getting rich quick

U.K.’s Financial Conduct Authority (FCA) warned on Monday that investments and lending products related to crypto come with “very high risks,” as per a report on news outlet CNBC.

The FCA has issued similar warnings in the past but the latest came after Bitcoin touched new highs of over $41,000 last week. The asset has since tumbled down to $33,000 after a sell-off on Monday, amidst a broader market pullback.

“The FCA is aware that some firms are offering investments in cryptoassets, or lending or investments linked to cryptoassets, that promise high returns,” the UK FCA stated, adding:

“If consumers invest in these types of products, they should be prepared to lose all their money.”

The note, however, was not centric to a particular token or Bitcoin. Instead, it seemed to help investors stay from high-interest projects, DeFi yield farms, or other crypto schemes that lure investors with the promise of big returns — which eventually never come or result in the project exit-scamming.

“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,” the FCA said.

Meant to protect investors?

Laith Khalaf, a financial analyst at investment management firm AJ Bell, told CNBC that the FCA’s note kept in mind the high risks already inherent in cryptoassets which was increasingly being compounded by scam activity. 

He added it further applied to unregulated firms that targeted consumers with marketing material that highlighted the rewards, “but not the potential downside,” of investing in cryptocurrencies.

The FCA, however, has been working towards that end. New regulations mean all crypto businesses in the UK have to necessarily and duly be registered with the FCA, and the regulator has even banned the sale of crypto derivatives to retail investors. Any firm found operating in the country without the requisite license is immediately termed an “illegal business.”

“Consumers should be wary if they’re contacted out of the blue, pressured to invest quickly or promised returns that sound too good to be true.”

Meanwhile, the UK regulator’s warning came as Bitcoin took a tumble on Monday. It fell nearly -22% amidst a broader pullback in the crypto markets—one that saw the value of many altcoins drop by a similar percentage.

Data suggested the market lost over $200 billion overnight, dropping down to a total market cap of $900 million after the sell-off. Traders had a tough time as well, with over $2.3 billion in liquidations as of Monday afternoon.

However, hodlers are still up. Bitcoin ran over 300% this year alone, meaning long-term investors are likely up in dollar terms.

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