South African Regulator Warns Crypto Investors to ‘Be Prepared to Lose All’ Following Collapse of Bitcoin Trading Company MTI – Regulation Bitcoin News
The Financial Conduct Authority (FSCA) has issued what it calls a health warning about cryptocurrencies after receiving numerous complaints from South African victims of cryptocurrency fraud. In a warning, the ACSE reminds potential investors that investments in cryptocurrencies are currently unregulated. Investors therefore have no claim against anyone in the event of a scam.
Crypto-currencies are risky assets
ACSE’s warning comes weeks after the regulator’s executive lamented the problems with the regulation of cryptocurrencies and how scammers abuse them. The official cited the defunct Mirror Trading International (MTI) as an example of how fraudsters are now using cryptocurrencies to circumvent regulations.
In its latest warning, the FSCA reminds South African investors to be wary of cryptocurrency companies that exaggerate potential gains or downplay risks. The South African regulator, like its counterparts in the UK and New Zealand, reiterates the message that investors in cryptocurrencies could potentially lose everything.
The FSCA statement warns:
Investing in crypto assets, or the investments and loans associated with them, usually involves a very high risk to investors’ money, which means you have to be prepared to lose all your money.
The regulator adds that there is no guarantee that crypto assets can be converted back into cash. According to the regulator, this leaves the consumer at the mercy of market supply and demand.
The power of fear to miss something
At the same time, the FSCA’s warning draws attention to what regulators see as the drivers of crypto assets.
The regulator says:
The price of crypto assets is determined by the sentiment or feeling of the general public, without any fundamental basis to determine value. Prices are determined by global sentiment, which is driven by those who have a vested interest in driving up the value of crypto assets.
FSCA officials believe that Ponzi operators and some crypto influencers are exploiting the fear of missing out (FOMO) to convince new and inexperienced investors to buy crypto assets. Therefore, to help investors, FSCA Alert also offers some useful tips for investors looking to buy crypto assets.
For example, cryptocurrencies should only make up a small part of their investment portfolio, regardless of the risk, the regulator said. Investors are also strongly advised to seek appropriate advice on the general suitability of such a risky product in their investment portfolio and on its consequences in the event of default.
ACSE concludes its statement by telling potential crypto asset buyers that an investment that sounds too good to be true usually is.
Do you agree with ACSE’s assertion that cryptocurrency prices are driven by public sentiment? You can share your thoughts below in the comments section.
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