The UK financial regulator, the Financial Conduct Authority (FCA) , has expanded the scope of the financial promotions regime to enhance protections for UK consumers investing in cryptoassets.
Cryptoasset firms marketing to UK consumers are subject to financial promotion requirements that came into effect on 8 October 2023.
The information below summarises key risks highlighted by the FCA. It is provided for general information and should not be treated as personal investment advice.
What are the key risks?
You could lose all the money you invest
The performance of many cryptoassets can be highly volatile, with their value potentially falling as quickly as it rises. You should be prepared to lose all the money you invest in cryptoassets.
The cryptoasset market is largely unregulated. There is a risk of losing money or cryptoassets due to risks including cyber-attacks, financial crime and firm failure.
You should not expect to be protected if something goes wrong
The Financial Services Compensation Scheme (FSCS) does not protect this type of investment because cryptoassets are not specified investments under the UK regulatory regime.
The Financial Ombudsman Service (FOS) does not cover poor investment performance. However, where a complaint concerns an FCA-regulated firm, the FOS may be able to consider it.
You may not be able to sell your investment when you want to
There is no guarantee that cryptoassets can be easily sold at any particular time. The ability to sell can depend on factors such as market supply and demand.
Operational problems, technology outages, cyber-attacks or the comingling of funds may cause delays and could prevent assets from being sold when desired.
Cryptoasset investments can be complex
Cryptoasset investments can be complex, which may make it difficult to understand the risks associated with them.
You should conduct your own research before investing and make sure you understand the product and associated risks.
Don't put all your eggs in one basket
Putting all your money into a single type of investment can increase your exposure to the risks associated with that investment.
The FCA has highlighted diversification as an important consideration and suggests that consumers consider limiting the amount they put into high-risk investments.
Protect yourself
Before committing funds to a cryptoasset investment, make sure you understand the product, the potential risks and the level of protection available to you.
Questions worth considering
- Do I understand how the cryptoasset or service works?
- Can I afford to lose the money I am considering investing?
- What risks could prevent me from accessing or selling my assets?
- What protections, if any, apply to the particular service or firm?
- Have I conducted independent research before making a decision?
Learn more from official sources
For the most current regulatory information, consumer guidance and information about cryptoassets, please consult the relevant official UK organisations directly.