Buying Bitcoin at the right time has turned people into millionaires – but as the cryptocurrency soars in value yet again it’s also attracted and awful lot of criminals keen to use it to rip people off – here’s how to make sure you’re buying the real thing.
But such stellar performance has also seen the number of scammers soar – with criminals keen to take advantage of people looking to cash in on the cryptocurrency’s rise.
The FCA has now said some firms are offering investments in cryptoassets, or lending or investments linked to cryptoassets, that promise high returns
But, while there’s no denying the recent rise, there’s also no guarantee prices will continue upwards.
The last time there was a surge like this – in late 2017 – prices swiftly collapsed, losing 80% of their value over the next two years and not recovering until December 2020.
“Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money,” the FCA said.
“If consumers invest in these types of product, they should be prepared to lose all their money.”
It also means people should make sure they understand what they’re investing in, the risks associated with investing, and any regulatory protections that apply, the FCA added.
That’s doubly true when most investments in Bitcoin take place in a way that mean Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS) can’t protect you in the way they can with normal savings and investments.
People should be particularly concerned about cold callers, the FCA said.
“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,” the FCA said.
But that doesn’t mean you can’t buy Bitcoin safely.
Since 10 January 2021, real UK cryptoasset firms have been registered with the FCA under regulations to tackle money laundering.
That means there is a way to check they’re legitimate.
The FCA’s concerns about high-return investments based on cryptoassets include:
- Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
- Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
- The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
- Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
- Firms may overstate the returns of products or understate the risks involved.
“Consumers should be aware of the risks and fully consider whether investing in high-return investments based on cryptoassets is appropriate for them,” the FCA said.
“They should check and carefully consider the cryptoasset business involved.”
How to check a firm is legitimate
- Step 1: Consumers should check if the firm they’re using is on the Financial Services Register or list of firms with Temporary Registration (Note: appearing on the Temporary Registration Register does not mean that the FCA has assessed them as fit and proper, nor that the FCA has determined their application for the purposes of the Money Laundering Regulations).
- Step 2: If they’re not on the register, consumers should ask the firm whether they are entitled to carry on business without being registered with the FCA.
- Step 3: If they’re not registered, the FCA suggests that consumers should withdraw their cryptoassets and/or money. This is because the firm is operating illegally if it has not ceased trading by 9 January 2021
Credit : mirror.co.uk
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