Some crypto assets highly risky, investors may lose all their money, warns EU markets regulator

Prominent markets regulator European Securities and Markets Authority (ESMA) on Wednesday warned investors that some crypto assets are highly risky and there is the possibility of them losing all their money. In its first Trends, Risks and Vulnerabilities (TRV) report of 2021, the Paris-based regulator said there is a high risk for investors in non-regulated crypto assets. “Some crypto-assets are highly risky and speculative…consumers must be alert to the high risks of buying and/or holding these instruments, including the possibility of losing all their money.”

“In the boom years of crypto between 2012 till about 2018, there was a lot of issuance of cryptos which didn’t make sense. Many of them are still in the market and unregulated. So, if you are an uneducated investor and just want to speculate, then investing in cryptos is the wrong place,” Mathew Chacko, Partner at law firm Spice Route Legal told The Outlooker Online.

The regulator noted that while crypto-assets come in many forms but the majority of them remain unregulated in the EU. This meant that investors buying cryptos or holding them do not benefit from the guarantees and safeguards that come with regulated financial services globally. In September last year, the European Commission had presented a legislative proposal for a regulation on markets in crypto-assets. “Consumers are reminded that the proposal remains subject to the outcome of the co-legislative process and so consumers do not currently benefit from any of the safeguards foreseen in that proposal because it is not yet EU law,” the report added.

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In India, cryptos’ fate continues to hang in balance as the government looks to ban all ‘private cryptocurrencies,’ according to a proposed Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 that is likely to be introduced in the current Parliament session. However, Finance Minister Nirmala Sitharaman had recently at the India Today Conclave said that “while the RBI may take a call on official cryptocurrency but from our side, we are very clear that we are not shutting off all options.”

“While in India, none of the players are regulated but since the authorities are extremely focused on the usage of cryptocurrencies, many of the unreliable cryptos have already been weeded out by companies like WazirX, Binance, and CoinDCX, etc. So, we have now got a curated list of cryptos we can invest in and most of them tend to be not the unregulated ones from a global perspective. Many of them are either regulated or are quite well known,” Chacko added.

The suggestions/recommendations around cryptocurrencies in this story are by the respective commentator. The Outlooker Online does not bear any responsibility for their advice. Please consult your financial advisor before dealing/investing in cryptocurrencies.