FCA losing all your money

kerrick

Time and again the FCA try to scare consumers off bitcoin with the claim you "can lose all your money" which is not strictly true. The wording of their message is careless.

Holding bitcoin is not like the risk many people equate with the risk of losing all their money, such as the unlimited liability that used to come with being a Lloyds name. 

You can only lose all of what you have invested, which is very different, and is the same risk consumers take every time they buy shares in any company. 

The FCA would be better emphasizing the prudence of diversification and not being over exposed to any single asset rather than bitcoin focussed scaremongering.

The result of the FCA overreacting means UK investors cannot even access the various bitcoin and etheruem ETFs which are available to investors outside the UK.

masonic

I'd question how many people would misinterpret that statement as meaning you could lose more money than you spend on cryptoassets. It is worded sloppily though, and leveraged products exist where you can lose more than you invest, there are even products like P2P lending where you can be sued as a result of your investments.

refluxer

kerrick said:

Time and again the FCA try to scare consumers off bitcoin with the claim you "can lose all your money" which is not strictly true. The wording of their message is careless.

The exact phrase is "if you invest in cryptoassets, you should be prepared to lose all your money" so it's obvious they're talking about all the money you have in the cryptoassets and not your other savings or investments. No-one would take it that literally. 

eskbanker

kerrick said:

You can only lose all of what you have invested, which is very different, and is the same risk consumers take every time they buy shares in any company. 

No, it's not the same risk, when mainstream investing entails some protection via dealing with or through regulated companies, ranging from FSCS cover in the event of platform failure through to FOS availability, although obviously there isn't protection against share value reduction from poor company performance.

In terms of the way the FCA have chosen to phrase their warning, they use the same wording for other investing too, at https://www.fca.org.uk/investsmart/5-questions-ask-you-invest, so it's not specifically used only with crypto warnings:

But, particularly if you’re considering an investment that offers higher returns, ask yourself whether you’re prepared to risk losing some – or even all – of your money if things go wrong.

It's probably largely moot anyway, in that crypto buyers are unlikely to be the sort of folk who'd pay much attention to what the FCA says, but they do make it clear (rightly IMHO) that it's unregulated, rather than scaremongering as such:

Examples of unregulated activities

These include activities involving direct investment in:

• cryptoassets (eg cryptocurrencies such as Bitcoin)
• commodities (eg gold, bamboo)
• hotels or hotel rooms
• UK or international forestry
• land for development
• overseas agriculture
• parking spaces
• student accommodation
• wine

kerrick said:

Holding bitcoin is not like the risk many people equate with the risk of losing all their money, such as the unlimited liability that used to come with being a Lloyds name. 

Seems a bit of a strawman to me, that generic wording used by the FCA is clearly not comparing crypto risks with that sort of exposure?

kerrick

I'd agree with most of what's said above.

The point about additional risk because crypto platforms are not FCA regulated is a fair point. But the FCA banning UK retail investors from getting exposure to bitcoin and ethereum through ETFs then forces anyone who wants some crypto in their portfolio to use the crypto platforms.

dunstonh

Time and again the FCA try to scare consumers off bitcoin with the claim you "can lose all your money" which is not strictly true. The wording of their message is careless.

How is it not true?       You can lose all of your money you hold on it.

Here is what the FCA say:




So, it clearly states you should be prepared to lose all the money you invest.  That is a true and correct statement.

masonic

kerrick said:

I'd agree with most of what's said above.

The point about additional risk because crypto platforms are not FCA regulated is a fair point. But the FCA banning UK retail investors from getting exposure to bitcoin and ethereum through ETFs then forces anyone who wants some crypto in their portfolio to use the crypto platforms.

I agree with you regarding the ban on ETFs. Given the availability of leveraged and inverse ETFs that could get naive investors into trouble, by comparison ETFs would solve issues such as the need to deal directly with exchanges of questionable standing and the risk of theft or loss of direct holdings.

masonic

dunstonh said:

Time and again the FCA try to scare consumers off bitcoin with the claim you "can lose all your money" which is not strictly true. The wording of their message is careless.

How is it not true?       You can lose all of your money you hold on it.

Here is what the FCA say:




So, it clearly states you should be prepared to lose all the money you invest.  That is a true and correct statement.

The FCA's main page on cryptoassets is less well worded: https://www.fca.org.uk/consumers/cryptoassets

Third bullet point "if you invest in cryptoassets, you should be prepared to lose all your money". The wording used in that reminder should really be transferred over.

Adyinvestment

I don't have a problem with them saying investing in crypto is risky and you can lose money, as in the value of the asset can go to zero.

I do have an issue saying that you can lose money as it is unregulated and we aren't going to help you, in fact we are going to give you no alternative but to take extra risk...and if you do manage to self protect yourself and make some profit make sure you pay us our cut!