The Financial Sector Conduct Authority (FSCA) has issued a so-called crypto health warning after receiving many complaints from South African victims of crypto scams. In the warning, the FSCA reminds potential investors that crypto-related investments are currently unregulated. Therefore, investors have no recourse against anyone if they are duped.
Cryptocurrencies are high-risk assets
The FSCA’s warning comes several weeks after an executive with the regulatory agency wailed the challenges of regulating cryptocurrencies and how scammers are taking advantage of them. The officer now chose it collapsed Mirror Trading International (MTI) as an example of how scammers are now using cryptocurrencies to circumvent regulations.
Meanwhile in the latter warningthe FSCA is reminding South African investors to be wary of crypto companies that “underestimate potential payouts or risks”. The South African regulator, like his colleagues in the UK and New Zealand, reiterates the message that crypto investors could potentially lose everything.
The FSCA statement warns:
Investing in crypto assets, or investments and loans linked to them, generally involves taking very high risks with investors’ money, which means you must be willing to lose all of your money.
The regulator also adds that “there is no guarantee that crypto assets can be converted back into cash.” According to the regulator, this states “consumers at the mercy of supply and demand in the market”.
The power of the fear of missing out
In the meantime, the FSCA’s cautionary statement also offers a glimpse of what regulators see as the driving forces behind crypto asset prices.
The regulator says:
The price of crypto assets is determined by the underlying mood or sentiment of the general public with no underlying basis for valuation. Prices are driven by the global sentiment driven by individuals who have an interest in the value of the crypto asset being floated.
The FSCA officials believe that Ponzi operators and some crypto influencers are taking advantage of the fear of missing out (FOMO) to convince new and inexperienced investors to buy crypto assets. Therefore, to help investors, the FSCA warning also provides some helpful tips for investors looking to buy crypto assets.
For example, according to the regulator, cryptocurrencies should “only make up a small part of their investment portfolio” regardless of risk. Investors are also urged to “seek good advice on the overall suitability of such a risky product in your investment portfolio and the impact on it if it fails”.
The FSCA concludes its statement by reminding potential buyers of crypto assets that “if an investment seems too good to be true, it usually is.”
Do you agree with the FSCA’s claims that cryptocurrency prices are determined by the underlying public mood? You can share your thoughts in the comments section below.
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