The United Kingdom’s 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.
The U.K.’s Financial Regulator Has Warned That Cryptocurrency CFDs Are “Increasingly Being Marketed to Consumers”
The FCA has issued a warning targeted at potential retail investors regarding cryptocurrency CFDs. The Financial Conduct Authority states that “these products are extremely high-risk, speculative products,” adding that the “warning is to inform consumers about the risks of buying them.”
The FCA describes contracts for difference as “complex financial instruments which allow you to speculate on the price of an asset [that] are often offered through online platforms.” The U.K. regulator defines cryptocurrencies as “a virtual currency that is not issued or backed by a central bank or government.”
The FCA Identifies Four Key Areas of Concern: Price Volatility, Leverage, Charges and Funding, and Price Transparency
The United Kingdom’s FCA states that “CFDs are typically offered with leverage which… multiplies the impact of price changes on both profits and losses.” The U.K. regulator warns that when trading with margin, investors “can lose money very rapidly.”
The Financial Conduct Authority warns that cryptocurrencies “have experienced significant price volatility in the past year.” The FCA states that “cryptocurrency 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 “the value of some cryptocurrencies recently fell by more than 30% in a single day,” adding that leverage trading during such volatile market conditions ”places [investors] at risk of suffering significant losses.” […]