Consumer Warning on Virtual Currencies
Consumer Warning Updated April 2021
Consumers are warned about the risks of buying or investing in “virtual currencies” (VCs), virtual assets and cryptocurrencies. VCs such as Bitcoin and Ether are unregulated VCs that can be used as a means of payment. However, they do not have legal tender status, and are not guaranteed or regulated by the Central Bank of Ireland, or any other central bank in the EU.
Risks of Virtual Currencies
If you buy a VC you are exposed to a number of risks including:
Extreme volatility
Most VCs are subject to extreme price volatility meaning there is a high risk that you will lose some or all of your money when you buy a VC, or a financial product that invests in VCs.
Absence of protection
VCs are unregulated under Irish and EU law. If you buy or hold them, you lose access to the guarantees and safeguards associated with regulated financial services.
For more on the safeguards that are lost in the case of VCs see: What compensation schemes protect consumers of authorised firms?
If you do decide to buy VCs, or a financial product that gives you exposure to VCs, you should fully understand the risks you are taking before you make the purchase.
Buying a VC from a firm that is regulated to provide financial services does not protect you from the above risks.
How to Protect Yourself
VCs are unsuitable for most consumers, including those with a short-term investment horizon, and especially those pursuing long-term goals like saving for retirement.
If you do decide to buy VCs, or a financial product that gives you exposure to VCs, you should fully understand the risks you are taking.
You should not invest money you cannot afford to lose.
Anti-money Laundering / Countering the Financing of Terrorism
As of 23 April 2021, the providers of certain services in relation to virtual assets will have to meet anti-money laundering and countering of financing of terrorism (AML/CFT) obligations.
The new legislation means virtual asset providers are subject to a number of new requirements, must register with the Central Bank and comply with AML/CFT obligations.
However, this new regulation does not change the fact that virtual currencies are not currently regulated. The new regulation does not give you any protections from the risks above.
See also: