Cryptocurrency: Stark Warning As Investors Said To Be Ready To “Lose All Their Money” | Personal Finances | Finance
One of the biggest issues for those who study cryptocurrencies is the risk factor and the large amount of scams involving these hard to find currencies. David Woodward, Managing Director of Woodward Financials, told Express.co.uk in an exclusive commentary everything investors need to know before putting their money forward.
What is cryptocurrency?
Mr Woodward began: “Cryptocurrency is digital or virtual currency secured by cryptography, which makes it almost impossible to counterfeit or use more than once.
“Many cryptocurrencies are based on blockchain technology and a decentralized network.
“A defining characteristic of cryptocurrencies is that they are generally not issued by any central authority, which makes them theoretically immune to manipulation or government interference.”
This is a significant risk factor as well as an ethical issue for some investors, but next to it there is the risk that crypto investing is nothing more than a popular trend that may soon disappear, has affirmed the expert.
“Cryptocurrencies promise to make it easier to transfer funds directly between two parties, without the need for a trusted third party like a credit card company or a bank, but is it ahead of its time?
“In a hundred years, will there be a common global cryptocurrency? Maybe yes, but is the cryptocurrency 100 years ahead of itself as the first electric car built over 130 years ago that took over 100 years to really gain a foothold in the world. society ? Will it take that long before we know if crypto will be a good investment or if it will go the way of sleeping? “
He continued, “The point of using a blockchain is to allow people, mainly those who don’t trust each other, to share valuable data in a secure manner. But the security of even the best-designed blockchain systems can still fail. “
Another touch point to keep in mind is that the anonymity provided by cryptocurrency often comes with the threat of being used for illegal spending and transfers, the expert suggested.
“The semi-anonymous nature of cryptocurrency transactions makes them well suited for a multitude of illegal activities, such as money laundering and tax evasion and may explain the emergence and increase in use. during the last years.”
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Mr Woodward added, “Some cryptocurrencies are more private than others, Bitcoin is a relatively poor choice for conducting illegal business online, as the forensic analysis of the Bitcoin blockchain has helped authorities stop and to prosecute criminals.
“And most recently, it allowed the US government to track, access a password-protected wallet, and recover $ 2.3 million paid to hackers.
It is only a matter of time before crypto wallets are emptied by hackers on an exponential scale, ”he said.
“In modern cryptocurrency systems, a user’s ‘wallet’ or account address has a public key, while the private key is known only to the owner and is used to sign transactions. Fund transfers are done with minimal processing fees, allowing users to avoid the high fees charged by banks and financial institutions for wire transfers.
“You could say it’s a good thing,” he added.
How risky is it?
Like all investments, there is an element of risk with cryptocurrency.
“If consumers invest in crypto-assets, or in investments and loans linked to them, they should be prepared to lose all of their money and they are unlikely to have access to any redress or recourse mechanisms. compensation.
“A fairly stern warning from the regulator that gives a clear indication of the level of risk associated with crypto-assets is that it is classified as a high risk or adventurous investment.”
The FCA itself has also made its position on cryptocurrencies clear to investors: “Many activities conducted using cryptoassets are unregulated, although they may appear similar to regulated activities.
“The FCA currently does not have the power to regulate crypto advertising to UK investors except when crypto-assets fall within the regulatory scope of the FCA. For example, under the ban on crypto derivatives, companies cannot market these products to UK consumers.
“The FCA has continually cautioned against the risks of investing in crypto-assets, or related investments and loans.
“All UK crypto-asset companies must be registered with the FCA under money laundering regulations.
“A drastically large number of companies are failing to meet the required standards, which has resulted in an unprecedented number of companies being withdrawn from their applications.
“The FCA continues to expect candidate companies to have strong anti-money laundering control frameworks to manage the heightened financial crime risks associated with crypto-assets.”