BRITS with cryptocurrency should “be prepared to lose all their money” with 2.3 million invested in assets, the financial regulator has announced.

New data from the Financial Conduct Authority shows the number of people stacking cash into crypto investments has increased 21% from 1.9 million last year.

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Britons have been warned of the dangers of investing in cryptocurrenciesPhoto credit: Getty

But only around a third (38%) consider it a gamble to invest, despite experts warning of the dangers.

While you should never invest your money in something you don’t understand, the FCA found that only 71% of Britons know what “cryptocurrency” actually means.

Worryingly, half (53%) said they invested more after having had a “positive experience”, up from 41% last year.

This is despite reports of British people losing hundreds of thousands of pounds to crypto scams.

FCA consumer and competition director Sheldon Mills said that while the British should be aware of the risks of investing, interest in the crypto market has increased.

5 Risks of Crypto Investing

The Financial Conduct Authority (FCA) has warned people about the risks of investing in cryptocurrencies.

  • Consumer protection: Some investments that advertise high returns on crypto assets may not be subject to regulation beyond anti-money laundering requirements.
  • Price volatility: The significant price volatility of crypto assets combined with the inherent difficulty of reliably valuing crypto assets puts consumers at high risk of loss.
  • Product complexity: The complexity of some products and services related to crypto assets can make it difficult for consumers to understand the risks. There is no guarantee that crypto assets can be converted back into cash. Converting a crypto asset back into cash depends on the demand and supply in the market.
  • Fees and Charges: Consumers should consider the impact of fees and charges on their investment, which can be greater than that of regulated investment products.
  • Marketing materials: Firms can overestimate the return of products or underestimate the risks involved.

He said, “It is important for customers to understand that if something goes wrong they are likely not to have access to the FSCS or the Financial Ombudsman Service as these products are largely unregulated.

“When consumers invest in such products, they should be ready to lose all their money.”

Experts have warned that buying cryptocurrencies, like any investment, is a very risky business and making money is never guaranteed.

You should make sure that you understand the risks of investing in cryptocurrencies and that you can afford to lose the money invested.

Cryptocurrencies are very volatile, so the value of your investments can go down as well as up in the blink of an eye.

Hargreaves Lansdown, senior investment and market analyst Susannah Streeter, said the FCA’s new research shows the British have a “dangerous financial stance” on crypto assets.

She said, “It is no surprise that the FCA took the publication of this study as an opportunity to issue a new warning that people are risking losing all of their money if they trade crypto assets.

“There is a danger that with so many posts and tips floating around on social media, people could be persuaded to invest emergency savings to make money quickly and leave them without financial security.”

While AJ Bell’s financial analyst Laith Khalaf said the fact that 14% of Britons have borrowed money to invest, according to the FCA, “is just terrifying”.

He said, “Buying cryptocurrency is a dangerous financial activity, and while many consumers seem to understand the risks, some are carelessly playing with fire.”

It is because regulators have proposed tough new rules to combat cryptocurrencies.

Banks that hold and trade cryptocurrencies may be forced to put more money aside to cover potential losses from the risky asset.

As China cracks down on Bitcoin operations across the country, 1,100 have been arrested on money laundering charges.

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