Cryptocurrency investors risk losing all their money invested in speculative, “too good to be true” assets and are at serious risk from fraudsters. This is what the European Union’s securities, banking and insurance watchdogs said in a joint statement on Thursday.
“Consumers face the very real possibility of losing all their invested money if they buy these assets,” the three EU authorities said.
It marks a ratcheting up of direct warnings to consumers about crypto-assets by EU authorities, spelling out that consumers have no protections or recourse to compensation under existing EU financial services law.
Regulators are increasingly worried that more consumers are buying 17,000 different crypto-assets, including Bitcoin and Ether, which account for 60 per cent of the market, without being fully aware of the risks, the regulators said.
“Consumers should be alert to the risks of misleading advertisements, including via social media and influencers. Consumers should be particularly wary of promised fast or high returns, especially those that look too good to be true,” the statement said.
The warning from the regulators also recommended prospective crypto investors ask themselves whether they could afford to lose the money they planned to invest, and whether they fully understood the features of the asset they were buying.
Last year, a rugpull scam hit buyers of a Squid Game-themed cryptocurrency when it transpired that the coin’s smart contracts prevented them from selling, even as the price peaked and then crashed.
Consumers should also be aware that energy consumption for producing some crypto-assets is high and that this can have an environmental impact, the statement said.
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