Crypto investors 'should be prepared to lose all their money,' top UK regulator warns

LONDON — Thinking of investing in a cryptocurrency? Be prepared to lose all your money.

That's the message from the U.K.'s Financial Conduct Authority, which on Monday warned investments and lending products related to crypto come with "very high risks."

"The FCA is aware that some firms are offering investments in cryptoassets, or lending or investments linked to cryptoassets, that promise high returns," the financial services regulator said.

"If consumers invest in these types of product, they should be prepared to lose all their money."

The warning from the FCA comes amid wild volatility in the cryptocurrency market. Bitcoin and other virtual currencies plunged on Monday, wiping off some $170 billion from the total value of all cryptocurrencies combined.

Bitcoin had surged to new records last week, climbing as high as $41,973. Investors increasingly view the digital asset as a hedge against inflation — similar to gold — in times of unprecedented stimulus from governments.

But bitcoin's wild rise has led some commentators to warn it could be a market bubble likely to burst soon. The world's most-valuable cryptocurrency has skyrocketed over 300% in the last 12 months. Bank of America called it the "mother-of-all-bubbles" in a recent note.

"The regulator is clearly concerned that the high risks already inherent in cryptoassets are being compounded by scam activity, as well as unregulated firms targeting consumers with marketing material that highlights the rewards, but not the potential downside, of investing in cryptoassets," Laith Khalaf, a financial analyst at AJ Bell, said in a note Monday.

The FCA has gotten tougher on crypto recently, banning the sale of crypto derivatives to retail investors. The regulator, which introduced a new register for cryptoasset businesses, warned that firms operating without registration are committing a "criminal offence."

"As with all high-risk, speculative investments, consumers should make sure they understand what they're investing in, the risks associated with investing, and any regulatory protections that apply," the FCA said.

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