FCA has concerns about investing in non-fungible tokens (NFTs)

abdelaziz Fathi

The Financial Conduct Authority (FCA) has reminded Britons of the “very high risks” involved with some crypto asset investments, including non-fungible tokens (NFTs).

The City regulator issued a statement which said it was aware of social media posts promoting investments linked to digital collectibles, and said this generally involves taking very high risks with investors’ money. NFTs could also lead to speculative trading, money laundering, and illegal financing as criminals look for any way to exploit new technologies, the FCA warns.

Additionally, the FCA reminded the general public that NFTs may not be regulated beyond anti-money laundering requirements. This implies that consumer safety is not guaranteed—like it’s often the case in the world of crypto.

According to industry estimates, the NFT market could reach $40 billion by the end of this year and more than $100 billion by 2025. As such, the rising popularity of NFTs has caused concerns among global regulators. Last month, both China and Hong Kong warned of financial risks associated with non-fungible tokens (NFTs) and the metaverse.

Britons were also warned not to fall for scams in which digital crooks use fake celebrity endorsements to promote investments. A greater use of social media websites has been identified as one of the reasons for this, with dummies in particular were more likely to be reliant on Facebook or twitter for investment tips.

UK tightens grip on crypto

In its warning, the FCA also highlighted other concerns including consumer protection, price volatility, product complexity, charges and fees, and marketing materials.

The regulator also warned that NFTs investors are unlikely to have access to the Financial Ombudsman Service or the Financial Services Compensation Scheme if something goes wrong.

Since January 2021, the City watchdog has become the anti-money laundering and counter terrorist financing supervisor of UK’s crypto asset firms. At the time, the FCA kicked off a registration scheme for crypto-asset firms with an initial deadline of one year.

Meanwhile, the UK Government plans to toughen up rules on crypto advertising that could be considered misleading. The Exchequer is proposing to bring the promotion of crypto-assets into the scope of the FCA’s existing oversight, rather than creating a new framework specifically for these products.

Providing the FCA with power to regulate the promotion of certain types of crypto assets, for the first time, would be the quickest way of doing this and stamping out misleading advertising.

Read this next

Retail FX

ThinkMarkets expands CFDs lineup to over 4000 ETFs and shares

ThinkMarkets has expanded its service offering by incorporating 2500 new CFDs on shares and ETFs on its ThinkTrader platform.

Retail FX

France regulator warns investors of Omega Pro, Businessempire.fr

France’s financial markets regulator alerted investors that scams related to Omega Pro Ltd are beginning to circulate, with the blacklisted firm capitalizing on the situation to run a range of “unrealistic” offers.

Digital Assets

Web3 platform Grand Time paid $2 million in token earnings to date

Community-driven Web3 platform Grand Time said its offering – which includes a multifaceted platforms and its native token – has been gaining significant traction highlighted by impressive operational metrics.

Institutional FX

FX volumes at MOEX halved in April as ruble gains gorund

Currency trading at Moscow Exchange (MOEX) halted its upward route in April as monthly volumes nearly halved from a month earlier.

Digital Assets

FTX US adds stock trading, fractional shares to crypto platform

FTX US, the American subsidiary of crypto exchange FTX has kicked off stock trading feature to its customers in an effort to compete with popular platforms such as Robinhood and eToro.

Industry News

UK FCA empowered to remove brokers’ permissions in 28 days

Businesses with permissions they don’t need or use, risk misleading consumers. These new powers will enable us to take quicker action to cancel permissions that are not used or needed.

Industry News

CFTC charges $44m Ponzi scheme but millions may have fled to foreign crypto exchange

The CFTC alleged that defendants transferred millions of dollars to an off-shore entity that, in turn, may have transferred funds to a foreign cryptocurrency exchange. None of these funds were returned to the pool.

Technology

Saxo Bank deploys Adenza to address Basel and EBA requirements

The integration of ControllerView will enhance Basel-driven capital calculations and reporting at Saxo Bank in support of the bank’s multijurisdictional capital and liquidity reporting requirements throughout Denmark, Switzerland and UK, with plans to expand into the Netherlands.

Executive Moves

ComplySci appoints CTO, CPO, and CLO to further regtech’s product expansion

ComplySci offers compliance software used by more than 1400 global institutions to identify risk and address regulatory compliance challenges.

<