Cryptocurrencies, like Bitcoin and Ethereum, are often in the news, because their ‘values’ can fluctuate massively.
Because of this, some people think they’re an easy way to make lots of money and quickly. But their unpredictability makes them a very risky investment – their value could go up or down (even in the same day) and even fall to zero, meaning you would lose all your money.
Only a relatively small number of cryptocurrency companies are regulated by the FCA and only partially. The FCA ensures that companies comply with the Money Laundering, Terrorist Financing and Transfer of Funds Regulations.
It is unlikely that you will be protected by the Financial Ombudsman Service or the Financial Services Compensation Scheme.
The firm should provide you with information about the potential risks and whether their products and services are covered by these protections. This means, if the company you put your money into goes bust, or you were scammed it’s highly likely you will lose your money.
The FCA regulates how companies sell cryptocurrencies to UK investors. All companies advertising cryptocurrencies must:
- give new customers a 24-hour “cooling-off period”. This means you must wait 24 hours before completing your transaction.
- include a clear risk warning
- be clear, fair and not misleading
- not include refer a friend and sign-up bonuses
Before investing, search the warning list on the FCA websiteOpens in a new window
Find out more on the Bank of England website about cryptocurrency and why it’s so volatile
Cryptocurrency isn’t the only type of investment that’s risky because you can lose all your money.
Others you might come across include mini bonds and venture capital trusts. Find out about these and more in our guide High-risk investment products.