Consumers are being warned by the EU securities, banking, and insurance regulators about the potential risks of investing in crypto.
The regulators have also issued a warning regarding the risks involved in cryptocurrency investments.
Reportedly, the European Banking Authority, the European Securities and Markets Authority, and the European Insurance and Occupational Pension Authority issued a joint press release on Thursday while warning consumers of the dangers of this budding class of assets.
“If these assets are purchased, consumers are likely to lose the money they invested,” said three EU financial observers. The warning was prompted due to the recent sudden growing investor interest in crypto and the assertive promotion of cryptocurrencies and related products by various social media and influencers. The regulators also added that cryptocurrencies are highly risky and speculative and “not suitable for most retail customers as an investment, payment or exchange method”.
Regulators believe that investors should consider a warning checklist of all the important risks that they should consider before investing in crypto assets. Concerns of the situation like extreme fluctuations, misleading information, lack of consumer protection, fraud, hacks, and market manipulations were cited by regulators as major concerns.
The regulators also warned that levels of fraud, theft and misleading advertisement will rise in the cryptocurrency market. According to the latest cryptocurrency report, scammers scammed people for $14 billion worth of cryptocurrency records in 2021. For example, in January, a group of investors filed a class-action lawsuit against reality TV star Kim Kardashian and world champion boxer Floyd Mayweather for making “false or misleading” statements and promoting the EthereumMax project, whose token dropped 97.8%.
Various crypto-native influencers that are well-known in the crypto world but very few outside of it – have been caught up in promoting shady projects that have since disappeared without a trace.
While influencers are often paid to expose projects to the people, some get caught up in paid promotions without any disclosure on their social media channels and such behaviour counts towards violation of United States securities laws.
With the popularity of technology, the NFT space has become a particularly rich ground for scams. Many projects have been criticized for charging excessive fees for NFTs, misleading investors, and failing to deliver on their promises. Considering the Pixelmon project, which raised $70 million from investors after massive marketing, has been accused of being one of the biggest scandals in recent times, but it is not a scam. After the revelation, Pixelmon apologized and became the subject of ridicule in the collection community.
EU regulators urged consumers to consider the situation where they can afford to lose the amount they have invested, before deciding to invest in cryptocurrencies and also warning them that “they have no right to protection or compensation if things go wrong”.
Don’t miss a thing, sign up for our newsletter