European Union (EU) financial regulators have released a warning over the lack of regulation and protections afforded to cryptocurrency wallets, stating investors “face the very real possibility of losing all their invested money if they buy these assets”.
The statement explains that cryptocurrencies are “highly risky and speculative” and “not suited for most retail consumers” as many people turn to digital currencies as a way to invest.
Consumers "face the very real possibility of losing all their invested money if they buy these assets; should be alert to the risks of misleading advertisements, including via social media and influencers; and should be particularly wary of promised fast or high returns, especially those that look too good to be true,” the European Securities and Markets Authority writes in a statement.
As the ongoing conflict in Ukraine continues to result in strong sanctions on Russia, crypto has been thrust into the spotlight as one of a few potential ways Russia may, in part, avoid them, while Ukraine has received a flurry of donations through crypto to help civilians and fund the defence.
Regardless, the EU has maintained a relatively cynical view on the emergence of crypto, regularly pointing to fraudulent and criminal activity that may use crypto to avoid authorities.
While it is almost impossible to know the full extent of illegal activity financed by crypto, one study found that around one-quarter of all Bitcoin users are involved in illegal activity in 2019, though other analyses have found this number to be just 0.62 percent and claim this use case is vastly overestimated.