The European Union banking, securities and pensions regulators have warned cryptocurrency investors of the Bitcoin’s “pricing bubble” and said that the investors could lose all their money.
The European Banking Authority, European Securities and Markets Authority, and the European Insurance and Occupational Pensions Authority claimed that there were no safeguards for consumers buying into the £290 billion cryptocurrency market.
“They are highly risky, generally not backed by any tangible assets and unregulated under EU law, and do not, therefore, offer any legal protection to consumers. Cryptocurrencies are subject to extreme price volatility and have shown clear signs of a pricing bubble… you should be aware that you could lose a large amount, or even all, of the money, invested,” all three said in a joint statement.
They added that most of the Bitcoin buyers were investing in the hope that cryptocurrencies would continue to rise in value “without being aware of the high risk of losing their money invested”.
This came as cryptocurrencies are facing a negative sentiment across the world as pressure from regulators is rising. Last week, Bitcoin prices fell to $7,000, from $20,000 in December. On Monday, Bitcoin climbed its way back from the four-month low of $5,922, to $9,069. Alternate coins Ripple, Litecoin, and Ether also climbed about 3.5%.
Meanwhile, the regulators also listed the risks of cyber attacks like the CoinCheck heist earlier this year which saw £380m in the cryptocurrency NEM stolen. They said there was no protection under EU law for such losses.
Information made available to consumers wishing to buy cryptocurrencies, “where such information is at all provided, is in most cases incomplete, difficult to understand, does not properly disclose the risks,” the regulators added in the statement.