The hazards of investing in cryptocurrencies have been raised by EU officials. The European Banking Authority, the European Securities and Markets Authority, and the European Insurance and Occupational Pensions Authority released a joint press statement on Thursday, warning customers about the hazards of the emerging asset class.
Consumers “risk losing all of their money if they buy these assets,” the EU financial watchdogs warned. The warning came as a result of rising investor interest in cryptocurrency and aggressive promotion of cryptocurrencies and associated items via social media and influencers. According to the regulators, cryptocurrencies are dangerous, speculative, and “not fit for most retail users as an investment, payment, or exchange.”
According to the regulators, the warning includes a checklist of the most significant risks that investors should consider before investing in cryptocurrencies. Extreme volatility, false information, a lack of consumer protection, fraud, hacks, and market manipulation were among the regulators’ primary concerns in the statement. The regulators’ warning comes as the cryptocurrency market’s level of fraud, theft, and deceptive advertising reaches unprecedented heights. Scammers took home a record $14 billion in cryptocurrency in 2021, according to the latest crypto crime report from blockchain analytics firm Chainalysis. For example, in January, a group of investors sued reality TV personality Kim Kardashian and world champion boxer Floyd Mayweather for making “false or deceptive promises” while pushing the EthereumMax project, whose coin has subsequently dropped by 97.8%.
Many crypto-native influencers, who are well-known inside the crypto community but less so outside of it, have been caught supporting fraudulent businesses that have vanished without a trace or “pulled the rug” from their investors. Influencers are frequently paid to promote initiatives, but some have been caught running paid advertisements on their social media channels without disclosing it (such behaviour violates security laws in the United States). Since the technology’s popularity exploded, the NFT area has become a particularly fertile ground for scams. Many projects have been chastised for charging exorbitant fees for NFTs, deceiving investors and not following through on their claims. The Pixelmon project, which collected $70 million from investors following extensive marketing but was later accused of providing subpar artwork, was one of the most recent controversies. Following the reveal, Pixelmon issued an apology, and the collection was mocked by the community.
Before investing in cryptocurrencies, customers should assess whether they can afford to lose all of their money, as they are “unlikely to have any rights to protection or compensation if things go wrong,” according to EU regulators.
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