The European Supervisory Authorities (ESAs) has warned customers that cryptocurrencies are “highly risky” assets that show “clear signs of a pricing bubble” in a pan-European Union consumer warning released Monday, Feb. 12.
The ESAs is made up of the European Securities and Markets Authority (ESMA), the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA).
The high risk associated with investing in cryptocurrency, according to the ESAs, means that investors can “lose a large amount, or even all, of the money invested:”
“The ESAs warn consumers that VCs (virtual currencies) are highly risky and unregulated products and are unsuitable as investment, savings or retirement planning products.”
The warning, published on the ESMA website, comes with an introduction that explains the fear that too many people are investing in crypto without fully understanding the risks.
The official warning also brings up the idea that unregulated exchanges are unprotected because of their existence outside of global financial regulations, meaning a customer’s losses from an event like a cyberattack would not be covered by EU law.
The ESAs’s warning ends with advice for investors to protect themselves:
“You should not invest money you cannot afford to lose.”
ESMA had previously warned customers in Nov. 2017 about Initial Coin Offerings (ICOs), citing the same reasons of a lack of investor understanding and the problems with unregulated financial activities.
The ESAs’s most recent warning today comes after the European Central Bank (ECB) told CNBC on Feb. 7 that crypto regulation is “not high on the to-do list.” Conversely, on Feb. 8, an ECB Executive Board member referred to cryptocurrency a “contagion” and “contamination” and called for preemptive regulation.
Based Blockchain Network