Financial Sector Conduct Authority issues second cryptocurrency warning

The (FCSA) has issued another cryptocurrency health warning for South African consumers. This is the second such warning issued by the Authority in just over a month.

The FCSA released it’s first such warning on 4 February 2021. In both statements, the FCSA notes that “crypto-related investments are not regulated by the Authority or any other body in South Africa.

As a result, if something goes wrong, you are not likely to get your money back and will have no recourse against anyone.”

The original warning issued on 4 February goes into greater detail about the Authority’s reservations for consumers interested in investing in cryptocurrency.

The most valid concerns are that crypto firms are not held to the same standards as normal financial service institutions and, as such, are more likely to be guilty of “overstating potential pay-outs or understating the risks.”

This warning comes in the aftermath of the collapse of Mirror Trading International(MTI), which made headlines for what now looks to essentially have been a Ponzi scheme claiming to offer significant returns from Bitcoin investments.

The statement itself should serve as a warning that investing in cryptocurrency has a high potential risk which increases exponentially if you have poor financial literacy and, worse still, don’t properly understand how cryptocurrency works.

The FCSA has noted that in response to “scam activity, as well as unregulated firms targeting consumers with marketing material that highlights the rewards, but not the potential downside”, the Authority working on measures to regulate “aspects and players in the crypto asset space.”

Whether consumers like it or not, the rising popularity of cryptocurrency will continue to attract unscrupulous individuals who are eager for you to part with your money. 

Whether you decide to invest in cryptocurrency or not, though, it’s important to remember that there are risks in dealing with third parties, and you absolutely should not invest in anything without first educating yourself about the benefits and risks beforehand.

The FSCA statement concludes with the warning: “The FSCA again reminds consumers who wish to invest in any investment asset or product – specifically unregulated, risky ones such as cryptos – that if it sounds too good to be true, it usually is.”