“Companies which offer crypto-assets with lofty promises to investors are coming under intense scrutiny, with regulators becoming increasingly concerned about the risks that these types of investment can pose to consumers.
Q1 2021 hedge fund letters, conferences and more
Complaint Against The Luno Cryptocurrency Platform
The advertising standards authority has upheld a complaint against the Luno cryptocurrency platform for failing to illustrate the risks of investing in Bitcoin on its posters. It said it took advantage of consumers’ lack of experience, implying that investing in it was straightforward.
In reality, cryptocurrencies are very complex, and are highly difficult to value, not least because the rules of the game can change so quickly.
The ban on Chinese banks and payment firms from providing crypto transaction services last week was a shock set-back for Bitcoin’s use case. In a one-two punch, it was quickly followed up by a crackdown on cryptocurrency mining by authorities in China. That set off a fresh downwards spiral in prices last weekend, with Bitcoin’s value more than halving, compared to the high it reached above $63,000 in mid-April.
Unregulated Cryptocurrencies Add More Uncertainty
On top of being extremely volatile, most cryptocurrencies are unregulated, which not only adds another layer of uncertainty but also means that investors have little or no protection against fraud. Plus, traders need to hold their cryptocurrencies on computers, phones or tablets within a digital wallet. That opens the door for cybercrime as hackers look for new ways to steal cryptocurrencies, particularly when they shoot up in value.
Beijing’s increasingly hard-line stance appears to be just the start of a concerted effort to limit the decentralised power of cryptocurrencies.
The US Federal Reserve has indicated that it thinks tougher regulation may be needed. In the UK the Financial Conduct Authority has told investors they could lose all their money if they indulge in cryptocurrency speculation. The Advertising Standards Authority is another regulator with crypto in its sights, ready to censure more firms if they don’t stick to strict codes of conduct."
Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
About us
Over 1.6 million clients trust us with £132.9 billion (as at 30 April 2021), making us the UK’s largest digital wealth management service. More than 98% of client activity is done through our digital channels and over 600,000 access our mobile app each month.
