UK Crypto Regulations & Risk Disclosure

Estimated reading time: 2 mins

Notice to customers in the UK

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

1. You could lose all the money you invest

• The performance of most cryptoassets can be highly volatile, with their value dropping as quickly as it can rise. You should be prepared to lose all the money you invest in cryptoassets.

• The cryptoasset market is largely unregulated. There is a risk of losing money or any cryptoassets you purchase due to risks such as cyber-attacks, financial crime and firm failure.

2. You should not expect to be protected if something goes wrong

• The Financial Services Compensation Scheme (FSCS) doesn’t protect this type of investment because it’s not a ‘specified investment’ under the UK regulatory regime – in other words, this type of investment isn’t recognised as the sort of investment that the FSCS can protect. Learn more by using the FSCS investment protection checker here.

• Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here.

3. You may not be able to sell your investment when you want to

• There is no guarantee that investments in cryptoassets can be easily sold at any given time. The ability to sell a cryptoasset depends on various factors, including the supply and demand in the market at that time.

• Operational failings such as technology outages, cyber-attacks and comingling of funds could cause unwanted delay and you may be unable to sell your cryptoassets at the time you want.

4. Cryptoasset investments can be complex

• Investments in cryptoassets can be complex, making it difficult to understand the risks associated with the investment.

• You should do your own research before investing. If something sounds too good to be true, it probably is.

5. Don’t put all your eggs in one basket

• Putting all your money into a single type of investment is risky. Spreading your money across different investments makes you less dependent on any one to do well.

• A good rule of thumb is not to invest more than 10% of your money in high-risk investments. Learn more here. If you are interested in learning more about how to protect yourself, visit the FCA’s website here.

For further information about cryptoassets, visit the FCA’s website here.

The risks of different cryptoasset products

Not all cryptoassets are the same. Before making an investment decision, it's essential to be aware of the unique risks associated with each type of cryptoasset products.

Stablecoin Risks. Stablecoins may not maintain their peg to the underlying asset due to reserve mismanagement, market stress, or issuer failure. Reserves may not be fully audited, and redemption may be delayed or restricted during periods of volatility.

Memecoin Risks. Memecoins are driven primarily by social media sentiment and community interest rather than fundamentals, and can lose most or all of their value rapidly. They are also more susceptible to pump-and-dump schemes and abandoned projects.

Utility Token Risks

Utility tokens depend on the adoption and success of their underlying platform. Regulatory uncertainty, demand fluctuations, and project failure can significantly affect their value, independent of broader market conditions.

Staking Risks

Staked tokens may be locked for a fixed period, limiting your ability to sell or transfer them. Validator failure or network penalties (slashing) can result in partial loss of staked assets, and reward rates are not guaranteed.

DeFi Token Risks

DeFi tokens rely on smart contracts, which may contain exploitable vulnerabilities. Liquidity risk, governance decisions made by other token holders, and reliance on external data feeds can all affect value and usability.