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Learn more about the risks connected to investing in cryptoassets

The Financial Conduct Authority (FCA), which oversees financial matters in the UK, has made some big changes to how companies can advertise cryptoassets. Starting from October 8, 2023, there are stricter rules to make sure that companies promoting cryptoassets to people in the UK, such as Wirex, follow these new rules. This is all done to better protect investors in the world of crypto. 

Customers from the UK should get acquainted.  

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 cryptoassets 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 cryptoassets. 

  • The cryptoasset market is largely unregulated. There is a risk of losing money or any cryptoassets 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) does not protect this type of investment because it is not a ‘specified investment’ under the UK regulatory regime – in other words, this type of investment is not recognized as the sort of investment that the FSCS can protect. Learn more by using the FSCS investment protection checker here

  • Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA regulated firm, FOS may be able to consider it. 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 cryptoassets can be easily sold at any given time. The ability to sell a cryptoasset depends on a range of factors, including the supply and demand in the market at that time. 

  • Operational failings such as technology outages, cyber-attacks and comingling of funds could cause unwanted delay and you may be unable to sell your cryptoassets at the time you want.   

4. Cryptoasset investments can be complex   

  • Investments in cryptoassets 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. Not all cryptoassets are the same   

  • Some cryptoassets may have additional risks specific to their nature. 

  • Stablecoins   carry   vulnerabilities.   Algorithmic   stablecoins   are not   backed   by   a currency and can experience significant volatility.    

6. 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. Learn more here.   

For those seeking comprehensive guidance on safeguarding themselves in the cryptoasset space, the FCA's website offers valuable resources.  

Interested parties can explore the FCA's website for further information on cryptoassets, gaining insights into the evolving landscape of digital assets and regulatory measures. As the crypto market continues to evolve, staying informed is paramount to making sound investment decisions. 

Not all cryptoassets are the same, and it is crucial to know the specific risks before you invest. Check out our easy-to-read asset risk summaries on Wirex Help Center, where we break down the key risks for different types of cryptoassets. These summaries provide a clear picture of what you need to be aware of when considering investments in the diverse world of digital assets. Take a moment to read through our asset risk summaries, empowering yourself with the knowledge to make well-informed decisions in the dynamic realm of crypto investing. 

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