GFSC warns about the risk of cryptocurrencies
CONSUMERS are being warned about the risk of investing in ‘volatile’ virtual currencies such as Bitcoin – and that they could lose all of their money.
The Guernsey Financial Services Commission has highlighted the risk of cryptocurrencies such as initial coin offerings which refer to a digital way of raising funds from the public using a virtual currency.
‘They are very high-risk speculative investments. ICO issuers accept a cryptocurrency, like Bitcoin or Ether, in exchange for a proprietary “coin” or “token” that is related to a specific firm or project,’ said the GFSC.
‘ICOs may represent a share in a firm, a prepayment voucher for future services or in some cases offer no discernible value at all. Often ICO projects are in a very early stage of development. The commission, along with several other regulators, has issued an advisory notice regarding the risks of investing in an ICO. Most ICOs are unregulated.
‘This means that it is unlikely that there will be any investor protections if anything goes wrong with an investment in an ICO. As with other cryptocurrencies, the value of the investment is volatile and has the potential for fraud.’
The GFSC added: ‘The commission would not expect ICOs to be sold to, or bought by, retail investors. Anyone considering buying an ICO should carry out full research on the ICO project and be prepared to lose the entire value of their investment.’
In the UK, the Financial Conduct Authority said it was aware that some firms were offering investments in so-called cryptoassets, or lending or investments linked to cryptoassets, promising high returns.
‘Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money. If consumers invest in these types of product, they should be prepared to lose all their money,’ said the FCA.
