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Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

1. You could lose all the money you invest

  • The performance of most crypto assets can be highly volatile, with their value dropping as quickly as it can rise. You should be prepared to lose all the money you invest in crypto assets.
  • The crypto asset market is largely unregulated. There is a risk of losing money or any crypto assets you purchase due to risks such as cyber-attacks, financial crime and firm failure.

2. You should not expect to be protected if something goes wrong

  • The Financial Services Compensation Scheme (FSCS) doesn’t protect this type of investment because it’s not a ‘specified investment’ under the UK regulatory regime – in other words, this type of investment isn’t recognised as the sort of investment that the FSCS can protect. Learn more by using the FSCS investment protection checker here [https://www.fscs.org.uk/check/investment-protection-checker].
  • The Financial Ombudsman Service (FOS) will not be able to consider complaints related to this firm or Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA regulated firm, FOS may be able to consider it. Learn more about FOS protection here [https://www.financial-ombudsman.org.uk/consumers].

3. You may not be able to sell your investment when you want to

  • There is no guarantee that investments in crypto assets can be easily sold at any given time. The ability to sell a crypto asset depends on various factors, including the supply and demand in the market at that time.
  • Operational failings such as technology outages, cyber-attacks and comingling of funds could cause unwanted delay and you may be unable to sell your crypto assets at the time you want.

4. Cryptoasset investments can be complex

  • Investments in crypto assets can be complex, making it difficult to understand the risks associated with the investment.
  • You should do your own research before investing. If something sounds too good to be true, it probably is.
  • Cryptoassets tend to have fewer underlying drivers of price/fair value compared to more traditional investments. As a result, investing in cryptoassets can be seen as inherently more risky. Cryptoassets may not have a clear purpose or vision, and/or may not offer any real value or utility to investors. They may also lack proper governance or development support, making them vulnerable to technical issues or bugs. Such risks can be more prevalent in “meme coins” (for example Shiba and Dogecoin) where price influences are more transient and subject to fluctuating community interest, particularly where lack of interest/abandonment can lead to aggressive declines in price.

5. Don’t put all your eggs in one basket

  • Putting all your money into a single type of investment is risky. Spreading your money across different investments makes you less dependent on any one to do well.
  • A good rule of thumb is not to invest more than 10% of your money in high-risk investments. [https://www.fca.org.uk/investsmart/5-questions-ask-you-invest]

If you are interested in learning more about how to protect yourself, visit the FCA’s website. [https://www.fca.org.uk/investsmart]

For further information about crypto assets, visit the FCA’s website. [https://www.fca.org.uk/investsmart/crypto-basics]