Europe warns of crypto assets before their rise: there is a real risk of losing everything

The European supervisory authorities come together in the face of the increasing investment boom in crypto assets to launch a clear warning message: they are unsuitable products for retail investors and the risk of losing everything is real. In addition, they add, it is very unlikely that they have any right to protection or compensation for loss.

This message came this Thursday through a joint statement by the European Banking Authority (EBA), the insurance authority (EIOPA), the stock market authority (ESMA) and the Joint Committee of European Authorities. After knowing the warnings, the Bank of Spain, the CNMV and the General Directorate of Insurance and Pension Funds supported the notices.

The monitors note that in “the context of growing consumer activity and interest in crypto assets and aggressive promotion of those assets and products to the public, including through social media,” consumers beware of misleading advertisingeven from influencers, and be wary of promises of quick or high returns.

They also remember that most cryptoactive “they are not regulated in the EU”, so in the event of loss, users will not benefit from protections such as claim mechanisms. In addition, they brand products as “complex”, with extreme price movements. “Many crypto assets are subject to price movements and are speculative, as its price usually depends solely on consumer demand“, they say.

Among the list of risks, they also point to the existence of fraud with false crypto assets, lack of cyber security on the platforms that offer them, as well as “market manipulation, lack of transparency in prices and low liquidity.”

In 2020, the European Commission presented a legislative proposal to regulate the cryptoactive markets (known as MICA), which has not yet entered into force, but seeks to protect consumers and the stability of the financial system. Nowadays, there are more than 17,000 different crypto assets, with Bitcoin and Ether among the best known. The supervisors add that the energy consumption of these cryptoactives is high in the mining and validation processes and, therefore, they have an act environmental impact.