You Could Lose it All in a Crypto Scam

TheStreet

European regulators warn consumers investing in crypto

Can you afford to lose all the money you invest?

If that sounds like a tough question, that’s probably because it is. 

‘Be Alert to the Risks’

And it is a question that the European Union’s European Union’s securities, banking and insurance regulators are advising consumers to ask themselves before they get involved in potentially shady cryptocurrency investments. 

Last year, scam artists ripped off over $7.7 billion worth of cryptocurrency, the blockchain analysis firm Chainalysis said, up 81% from the previous year.

“Consumers face the very real possibility of losing all their invested money if they buy these assets,” the EU agencies said in a statement. “Consumers should be alert to the risks of misleading advertisements, including via social media and influencers.”

They should be particularly wary of promised fast or high returns, especially those that look too good to be true.

And since crypto-assets and related products and services typically fall outside existing protection under current EU financial services rule, consumers should be aware of the lack of recourse or protection available to them.

Extreme Price Movements

There are more than 17,000 different crypto-assets, the EU regulators said, including bitcoin and ether, which account for 60% of the market.

Many crypto-assets are subject to sudden and extreme price movements and are speculative, because their price often relies solely on consumer demand. 

You may lose a large amount or even all of the money you invested. 

The extreme price movements also mean that many crypto-assets are unsuitable as a store of value, and as a means of exchange or payment.

Some crypto-assets and related products are aggressively advertised to the public, using marketing material and other information that may be unclear, incomplete, inaccurate or even purposefully misleading, European regulators warned.

There are many fake crypto-assets exist for the sole purpose of separating consumers from their money.

The distributed ledger technology underpinning crypto-assets can have its own specific risks.

Several issuers and service providers for crypto-assets, including crypto exchanges and wallet providers, have experienced cyber-attacks and severe operational problems.

‘Scams and Casino Coins’

Many consumers have lost their crypto-assets or suffered losses due to such hacks and disruptions or because they have lost the private keys providing access to their assets, the EU agencies said.

In addition, consumers should be aware of the environmental impact of crypto-assets as they consume a high amount of energy, the statement said.

These warnings were greeted with derision on social media.

“Consumers risk losing money invested in crypto and could fall prey to scams, the EU’s securities, banking and insurance watchdogs said in a joint statement on Thursday,” one person said on Twitter. “So instead invest in the US stock market then at least the 1% can profit off you while you’re robbed.”

“EU crypto strategy – only scams and casino coins are welcome here!” another person tweeted.

“The EU parliament failed to vote to ban Bitcoins in Europe so I don’t see too much change to stop this horrible scam,” another commenter said.

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