Britain’s Financial Conduct Authority (FCA) has warned the public that, “UK consumers are being increasingly targeted by cryptocurrency-related investment scams.” Cryptocurrencies are currently unregulated in Britain, so the trading of crypto, and even the establishment of a cryptocurrency exchange, “fall outside the regulatory remit” of the FCA.
However, as the statement notes, “some types of cryptocurrency products may be or may involve regulated investments,” for instance, “firms that sell regulated investments with an underlying cryptocurrency element” may need FCA approval.
Over the last few months the FCA says that it has “received an increasing number of reports about cryptocurrency investment scams,” some involving regulated activity, and some not, “but all of which use similar tactics.”
Most advertising is done through social media, often using the images of celebrities to attract attention. Ads will link to “professional-looking websites” which will try to persuade users to invest, using either fiat or cryptocurrency. Although the majority of these firms are based outside of the UK they will often “claim to have a UK presence, often a prestigious City of London address.”
The FCA warn that such companies can employ a variety of means to fleece their customers. They may “manipulate software to distort prices and investment returns” or even persuade customers to buy non-existent cryptocurrencies. Even if an investment has been made, these firms may “suddenly close consumers’ online accounts” and refuse to transfer balances, or even “ask for more money before the funds can be transferred.”
Advising the public how to protect itself, the FCA suggests that people “be wary of adverts online” which promise “high returns on investments in cryptocurrencies or cryptocurrency-related products.” The majority of these companies will not be authorised by the FCA, which means that crypto investors have considerably less protection from things going wrong.
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