Cryptocurrencies are “highly risky” assets and are unsuitable as investments, three European Union (EU) regulators warned Monday.
The European Supervisory Authorities (ESAs) for securities, banking and insurance and pensions said in a joint statement that they were “concerned” about an increasing number of people buying virtual currencies without being aware of the risks involved.
“The ESAs warn consumers that VCs (virtual currencies) are highly risky and unregulated products and are unsuitable as investment, savings or retirement planning products,” the regulatory agencies said.
The group of watchdogs said that cryptocurrencies like bitcoin are volatile and show “clear signs of a pricing bubble.” It added that people investing in them should be conscious of the high risk that they could “lose a large amount, or even all, of the money invested.”
As virtual currencies and exchanges used to trade them are not regulated under EU law, the regulators warned that cryptocurrency investors are not protected in the event of an exchange going out of business or a cyber-attack. Last month, cryptocurrency lending and exchange firm Bitconnect said it was shutting down its platform after it received cease-and-desist letters from securities divisions in Texas and North Carolina.
The EU joins a number of government authorities in raising concern over cryptocurrencies.
South Korea, for instance, introduced measures to tackle speculation in the sector, banning the use of anonymous bank accounts in cryptocurrency trading. And Indian Finance Minister Arun Jaitley said recently that his government will take measures to “eliminate” the use of cryptocurrencies in “illegitimate activities or as part of the payment system.”