There may be trouble ahead for crypto investors (Picture: Getty/Metro.co.uk)
People who invested in Bitcoin and other cryptocurrencies could soon lose all their money.
That’s the warning from the European Union, which said the surging value of virtual currencies is a bubble which could burst at any time.
Bitcoin, the most famous cryptocurrency, soared by more than 1,000% in 2017 but has already lost about half of its value this year as governments around the world threaten a clampdown on the unregulated market.
Yesterday, the European Union’s banking, securities and insurance watchdog said the information given to people who buy digital dosh is ‘in most cases incomplete, difficult to understand, does not properly disclose the risks … and may therefore be misleading’.
‘Virtual currencies such as Bitcoin, are subject to extreme price volatility and have shown clear signs of a pricing bubble and consumers buying VCs should be aware that there is a high risk that they will lose a large amount, or even all, of the money invested,’ the warning continued.
The price of Bitcoin has been on a rollercoaster ride over the past three months (Chart: Coindesk)
A probe was requested by European Commission Vice-President Valdis Dombrovskis, who said last month that the bloc must prevent cryptocurrencies from becoming a ‘token for unlawful behaviour’.
There will be a meeting of key authorities and the private sector very shortly to assess the longer-term situation for cryptocurrencies beyond current market swings, he said.
Last week Germany and France asked the Group of 20 Economies (G20) to discuss possible regulation for cryptocurrencies at its next meeting.
Markus Ferber, vice chair of the European Parliament’s economic affairs committee, said the warning was overdue and ‘Wild West’ virtual currencies should be regulated like other financial instruments.
‘I expect the Commission to take the warnings by the three supervisory authorities seriously and issue a legislative proposal in this regard as soon as possible,’ Ferber said.
Regulation will force policymakers to balance consumer protection and prevention of money laundering with allowing innovation in markets. The rise of VCs also raises concerns about the relevance of some non-dollar currencies.
Bitcoin, along with Ripple, Litecoin and Ethereum among others, are not issued or backed by a central bank and exchanges where consumers can trade them are not regulated under EU law.
The EU regulators said that any losses from an exchange going bust or money stolen from a VC account due to cyber attacks would not be covered by national protection schemes.