January 25, 2021

FCA warns crypto investors could “lose all their money” after Bitcoin dips again

The Financial Conduct Authority (FCA) has issued a warning to cryptocurrency investors following another post-weekend dip in Bitcoin’s ever-climbing value.

The UK regulator says consumers who invest in crypto assets “should be prepared to lose all their money” due to their “significant price volatility”.

FCA building logo

“Operating without a registration is a criminal offence,” the FCA reminds the fintech industry

“Too good to be true”

The FCA says firms which offer these sorts of investments are “taking very high risks with investors’ money”.

“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 regulator adds.

The FCA reinforces a requirement which came into force on 10 January. It instructs all UK firms which offer crypto asset-related products to be registered with the FCA.

“Operating without a registration is a criminal offence,” it reminds the fintech industry.

The regulator also recently introduced a ban on the sale of crypto derivatives to retail investors.

Bitcoin dips below $33,000

Last weekend, the value of Bitcoin climbed to an all-time high of $41,973. But then on Monday, it dropped below $33,000 – briefly knocking off nearly $9,000 from its value.

At time of writing, Bitcoin’s value sat at around $35,000.

The dip follows a trend. On Sunday 3 January, Bitcoin surged above $34,000 for the first time. But its value then proceeded to drop to around $29,000 on Monday morning.

The cryptocurrency did, however, bounce back quickly.

Bitcoin hit lows of around $18,700 in early December, meaning its $41,973 high marks more than a doubling in value in less than two months.

Bitcoin delivered a more than 300% gain last year, according to Reuters. The crypto market crash has sent ripples through other crypto assets. Altcoin Ether dropped nearly 19% alongside Bitcoin.

UK consultation

In related news, the UK’s finance ministry has opened a consultation on the regulation of cryptoassets and stablecoins. Last week, Her Majesty’s (HM) Treasury released a document representing the “first stage” in the consultative process.

It seeks views on “the benefits of new technologies, supporting innovation and competition, while mitigating risks to consumers and stability”.

The document also asks participants to present evidence of wholesale uses of cryptoassets, and the “broader use of distributed ledger technology (DLT)” in markets.

John Glen, MP and economic secretary to HM Treasury, says that two years on from the launching of a government taskforce “the landscape is changing rapidly.”

He adds stablecoins could “pave the way” for faster, cheaper payments. Glen says there is increasing evidence DLT could have “significant benefits” for capital markets.

“The government is proposing an approach to cryptoasset regulation under which firm requirements are designed and implemented by the independent regulators,” the document states.

Currently, the FCA is in line as the regulator of choice for token-based cryptoasset activities. In some cases the Bank of England or the Payment Systems Regulator (PSR) may also step in.

If this consultation is put into practice, it could see a more specialised regulator take over from the FCA with regards to crypto assets in the UK.

Read next: UK Treasury calls for input on planned regulation of cryptoassets and stablecoins