Latest news about Bitcoin and all cryptocurrencies. Your daily crypto news habit.
The United Kingdomâs Financial Conduct Authority (FCA) has published a warning aimed at retail investors who may be considering or soliciting cryptocurrency CFDs (contracts for difference). The U.K. regulator emphasized the risks associated with the price volatility, charges and funding costs, leveraged trading products, and price transparency, asserting that such may manifest in the cryptocurrency CFD markets.
Also Read:Â FCA Accuses Banks of Anti-Competitive Practices Towards DLT Start-Ups
The U.K.âs Financial Regulator Has Warned That Cryptocurrency CFDs Are âIncreasingly Being Marketed to Consumersâ
The FCA has issued a warning targeted at potential retail investors regarding cryptocurrency CFDs. The Financial Conduct Authority states that âthese products are extremely high-risk, speculative products,â adding that the âwarning is to inform consumers about the risks of buying them.â
The FCA describes contracts for difference as âcomplex financial instruments which allow you to speculate on the price of an asset [that] are often offered through online platforms.â The U.K. regulator defines cryptocurrencies as âa virtual currency that is not issued or backed by a central bank or government.â
The FCA Identifies Four Key Areas of Concern: Price Volatility, Leverage, Charges and Funding, and Price Transparency
The United Kingdomâs FCA states that âCFDs are typically offered with leverage which⊠multiplies the impact of price changes on both profits and losses.â The U.K. regulator warns that when trading with margin, investors âcan lose money very rapidly.â
The Financial Conduct Authority warns that cryptocurrencies âhave experienced significant price volatility in the past year.â The FCA states that âcryptocurrency CFDs are an extremely high-risk, speculative investment⊠[that] are vulnerable to sharp changes in price due to unexpected events or changes in market sentiment. The FCA warns that âthe value of some cryptocurrencies recently fell by more than 30% in a single day,â adding that leverage trading during such volatile market conditions âplaces [investors] at risk of suffering significant losses.â
The FCA Warns That The âCharges and Funding Costsâ Associated With Cryptocurrency CFDs âTend to Be Significantly Higher Than for Other CFD Productsâ
The financial regulator asserts that âfees can include the spread, funding charges, and commissionsâ incurred while trading, stressing that investors âshould consider the impact of these fees, which may vary significantly between firms.â
The UK regulator also warns that the forces driving price fluctuations in the price of cryptocurrency CFDs may not be as transparent as those that guide the markets of traditional currencies. The FCA notes that âthere can be more significant variations in the pricing of cryptocurrenciesâ and âthere is a greater risk [investors] will not receive a fair and accurate price for the underlying cryptocurrency when trading.â
CFDs Fall Under the Regulatory Jurisdiction of the FCA
The FCA states that investors trading cryptocurrency CFDs are afforded the protections âoffered by the UKâs financial services regulatory framework.â Said protections means that firms providing CFDs âmust be authorized and supervised by [the FCA],â and âindividuals complaints can be referred to The Financial Ombudsman Service.â The FCA adds that some âCryptocurrency CFDs may be offered by firms which are established and authorized in the European Economic Area (EEA). If [an investor] trade[s] with a firm in another EEA jurisdiction, any individual complaints will need to be referred to the relevant authority in that jurisdictionâ
The Financial Conduct Authority emphasizes that its âprotections will not compensate [investors] for any losses from trading. [Investors] should still be careful and consider whether these products are right for [them].â
Do you trade cryptocurrency CFDs? Share your thoughts on the markets in the comments section below!
Images courtesy of Pixabay, Shutterstock and fca.org.uk.
Make sure you do not miss any important Bitcoin-related news! Follow our news feed any which way you prefer; via Twitter, Facebook, Telegram, RSS or email (scroll down to the bottom of this page to subscribe). Weâve got daily, weekly and quarterly summaries in newsletter form. Bitcoin never sleeps. Neither do we.
The post FCA Issues Warning Regarding Cryptocurrency CFDs appeared first on Bitcoin News.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.