Wednesday 31 July 2019 5:32 pm

Cryptocurrencies have ‘no intrinsic value’, warns FCA

Investors should be cautious over cryptocurrencies such as Bitcoin as they have “no intrinsic value”, the City regulator has warned.

In a statement released today, the Financial Conduct Authority (FCA) said consumers must ensure they understand and can bear the risks of volatile digital currencies.

Read more: US senators grill top exec over Facebook’s Libra cryptocurrency

The FCA warned that most cryptocurrencies are unregulated and are not covered by the Financial Services Compensation Scheme, which is designed to protect customers when financial services firms collapse.

“A combination of market immaturity, volatility, and a lack of credible information or oversight raises concerns about market integrity, manipulation and insider dealing within cryptoasset markets,” the regulator said.

The comments came in a clarification on the FCA’s previous guidance, which prompted almost 100 responses from across the financial services sector.

The FCA said so-called exchange tokens, such as Bitcoin and Ethereum, would not be regulated, but would be subject to anti-money laundering measures.

Cryptocurrencies have come under increased scrutiny in recent weeks after Facebook unveiled plans to launch Libra, its own digital coin.

While the FCA did not make specific reference to Facebook’s venture, it said that so-called stablecoins such as Libra could fall under its rules.

Read more: Hackers steal $32m from Tokyo cryptocurrency exchange

“It’s positive to see the FCA clarifying its approach to regulating cryptoassets, but the speed of progress remains very slow and deliberate,” said Matt Hopkins, head of fintech at business advisory firm BDO. “There is a risk that the FCA will end up being too reactive in protecting retail investors.”

The FCA said its guidance will inform the Treasury’s consultation on whether further regulation of the cryptoasset market is needed.

Main image credit: Getty