Tuesday, June 25, 2019

Cryptocurrency Is Not A “Get Rich Quick” Scheme, Says FCA

The crypto boom attracted lots of people who saw the industry as a fast way of making money, but recent research by the Financial Conduct Authority (FCA) has exposed the ignorance of many crypto owners concerning their investments. Many of them know little about the asset they invested in and in addition, they conduct no research before buying.

After a careful survey of 2,132 consumers, the Financial Conduct Authority discovered that over 70% of consumers have no good understanding of cryptocurrency.

Purchasing of Digital Assets for Wrong Reasons

The regulator stated that: “Despite this lack of understanding, the crypto asset owners interviewed were often looking for ways to ‘get rich quick,’ citing friends, acquaintances and social media influencers as key motivations for buying cryptoassets.”

The research disclosed that only 8% of people who own cryptocurrency actually researched deeply before making the purchase, while 16% couldn’t be bothered to do any research.

30% of the surveyed individuals admitted to buying digital assets “as part of a wider portfolio,” 18% saw it as a get rich quick scheme, and 62% are of the opinion that cryptocurrencies are just alternatives to traditional currencies. Also, 11% thought it best to invest in crypto assets rather than in conventional financial institutions, while 8% described digital assets as pension, hence the reason they invested in it to act as a “long-run savings plan.”

Furthermore, 31% recognized the volatile nature of the asset class and accepted that their investment is a gamble that could either be beneficial or a loss to them.

About 30% thought it too risky while 16% could not invest because of the shortage of funds.

Things May Not Be So Bad

In the latest research of the FCA on cryptocurrencies, it was observed that “the overall scale of harm may not be as high as previously thought.” Among the respondents, less than a third had knowledge of cryptocurrency while those who have actually invested in digital assets are just 3%.

While speaking about the discoveries made by the FCA, Christopher Woolard, the organization’s executive director of strategy and competition said the research would “help us ensure we are acting on evidence as we seek to protect consumers and market integrity.”

He further said: “The results suggest that although cryptoassets may not be well understood by many consumers, the vast majority don’t buy or use them currently. While the research suggests some harm to individual crypto asset users, it does not indicate a large impact on wider society.

“Nevertheless, cryptoassets are complex, volatile products – consumers investing in them should be prepared to lose all of their money.”

 

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