Digital currency-based cryptocurrency is said to be a high risk investment. The Financial Conduct Authority (FCA), a British Regulator, cautioned investors about signing contracts for CFDs or contract for differences.
The FCA warned investors about crypto-based CFDs. CDFs are high risk. Some of the risks include charges and funding costs, price volatility, price transparency, leverage, and instability.
Decide if venturing into virtual currency CFDs is right for you, cautioned the FCA. There are legal safeguards in place, but these guards cannot protect investors. Losses incurred by investors will not be reimbursed by any bank or government.
“Cryptocurrency CFDs are an extremely high-risk, speculative investments. You should be aware of the risks involved and fully consider whether investing in cryptocurrency CFDs is appropriate for you.”
CDF exchanges state that both trading parties must agree to pay either side when the underlying value of a virtual asset changes over time. CFD products are set up to permit investors to take on the prices of numerous assets. Digital currencies are considered CFD products, investing in them is very risky, warned the Financial Conduct Authority.
Previous FCA Warnings Against Cryptocurrency Trading
FCA Director of Strategy and Competition, Chris Woolard in June of 2017, urged investors to practice care when trading in cryptocurrencies.
In September of the same year, the regulator notified investors that the initial coin offerings or ICOs are highly perilous investments. He asked investors to report to the FCA any fraud they encounter in the cryptocurrency-based funding model.
In November, the United States, Germany, and the Netherlands issued their own warnings about investing in ICOs.