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Risks associated with cryptocurrency investments

Due to the potential for losses, the Financial Conduct Authority (FCA)
considers this investment to be high risk.


What are the key risks?

1. You could lose all the money you invest
• The performance of most crypto assets can be highly volatile, with
their value dropping as quickly as it can rise. You should be
prepared to lose all the money you invest in crypto assets.
• The cryptoasset market is largely unregulated. There is a risk of
losing money or any crypto assets you purchase due to risks such as
cyber-attacks, financial crime and firm failure.

2. You should not expect to be protected if something goes wrong
• The Financial Services Compensation Scheme (FSCS) doesn’t
protect this type of investment because it’s not a ‘specified
investment’ under the UK regulatory regime – in other words, this
type of investment isn’t recognised as the sort of investment that the
FSCS can protect. Learn more by using the FSCS investment
protection checker here
•The Financial Ombudsman Service (FOS) will not be able to
consider complaints related to this firm. Learn more about FOS protection here. 

3. You may not be able to sell your investment when you want to
• There is no guarantee that investments in crypto assets can be easily
sold at any given time. The ability to sell a crypto asset depends on
various factors, including the supply and demand in the market at
that time.
• Operational failings such as technology outages, cyber-attacks and
commingling of funds could cause unwanted delays and you may be
unable to sell your crypto assets at the time you want.

4. Cryptoasset investments can be complex
• Investments in crypto assets can be complex, making it difficult to
understand the risks associated with the investment.
• You should do your own research before investing. If something
sounds too good to be true, it probably is.

5. Don’t put all your eggs in one basket
• Putting all your money into a single type of investment is risky.
Spreading your money across different investments makes you less
dependent on anyone to do well.
• A good rule of thumb is not to invest more than 10% of your money
in high-risk investments.

If you are interested in learning more about how to protect yourself,
visit the FCA’s website here. 

For further information about crypto assets, visit the FCA’s website


The risks of different crypto assets

Remember, not all cryptoassets are similar. Before investing, you should understand the specific risks involved and be familiar with possible ways to mitigate them.

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