A group of European financial regulators have issued another formal warning to consumers about the risks of cryptocurrency.
In a new report, the European Supervisory Authorities, which includes the European Securities and Markets Authorities (ESMA), the European Banking Authority, and the European Insurance and Occupational Pensions Authority, warned consumers that crypto assets are “highly risky and speculative.”
According to the regulators, cryptocurrency is “not suited for most retail consumers as an investment or as a means of payment or exchange.”
“Consumers face the very real possibility of losing all their invested money if they buy these assets. Consumers should be alert to the risks of misleading advertisements, including via social media and influencers. Consumers should be particularly wary of promised fast or high returns, especially those that look too good to be true.”
It’s not clear why the group of regulators published a warning, and they didn’t name any specific coins or projects to look out for, but they did name non-fungible tokens (NFTs), decentralized finance (DeFi), and surprisingly, crypto-based life insurance.
“The ESAs note growing consumer activity and interest in crypto-assets, including so-called virtual currencies and the emergence of new types of crypto-assets and related products and services, for instance, so-called non-fungible tokens (NFTs), derivatives with crypto-assets as underlying, unit-linked life insurance policies with crypto assets as underlying and decentralised finance (DeFi) applications, that claim to generate high and/or fast returns. The ESAs are concerned that an increasing number of consumers are buying those assets with the expectation that they will earn a good return without realising the high risks involved.”
Also mentioned in the report is the alleged environmental concerns surrounding cryptocurrency and proof-of-work systems. Earlier this week, European Union officials came close to banning proof-of-work altogether and by proxy, cryptocurrencies like Bitcoin (BTC), but ended up rejecting the ban after a 30-23 vote in favour of dropping the provision.