European Union financial regulators warned retail consumers against buying crypto-assets, saying many crypto-asset investments are highly risky and speculative.
The European Supervisory Authorities (ESA) released a joint statement on Thursday on the possible risks of cypto-asset investments. ESA identified extreme price movement, misleading information, absence of protection, product complexity, and fraud and malicious activities as some of the risks of crypto-asset investments.
ESA said that crypto-assets are complex and are subjected to sudden and extreme price movements. The European Union also does not regulate the majority of crypto-assets, disabling the protection on consumers’ investments.
“You should be aware of the fact that exchange platforms are not banks that hold their virtual currency as a deposit. If an exchange platform loses any money or fails, there is no specific legal protection – for example through a deposit guarantee scheme – that covers you for losses arising from any funds you may have held on the exchange platform, even when the exchange is registered with a national authority,” said the European Banking Authority (EBA).
Crypto-assets are also subjects of fraudulent and malicious activities.
“The ESAs are concerned that an increasing number of consumers are buying those assets with the expectation that they will earn a good return without realizing the high risks involved,” said ESA in a statement.
ESA released the warning as a response to the rising consumer activities and interests in crypto-assets and aggressive advertisement of crypto-asset investments on social media.
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