The regulators are becoming wary of the soaring crypto prices and increasing demand for digital currencies. Germany’s Federal Financial Supervisory Authority, popularly known as BaFin, issued a fresh consumer warning against cryptocurrencies.
“Despite recent price records, virtual currencies such as Bitcoin and other crypto values are highly risky and speculative investments,” the regulator warned.
BaFin’s warning came days after the European Supervisory Authorities (ESA) cautioned investors about the risks in crypto investments. Additionally, other European regulators are raising alarms to caution small investors of potential risks of crypto.
The German watchdog earlier warned against cryptocurrencies in January when the crypto prices were soaring high.
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“You shouldn’t be blinded by the recent price increases of well-known cryptocurrencies such as Bitcoin, Ether, XRP, Bitcoin Cash and Litecoin,” the regulator then noted with an additional warning on crypto derivatives.
No Protection for Losses
However, Germany is one of the few countries with a straight-forward stance on cryptocurrencies. The financial market regulator sees cryptocurrencies as financial instruments and mandated the licensing of all crypto custodian businesses operating in the country.
Despite the regulations, the market watchdog clarified that any losses incurred in crypto are not protected.
“Currently, crypto values are largely unregulated in the European Union,” BaFin added. “In Germany, companies that want to operate the crypto custody business require a permit from BaFin. In addition, companies need permission from BaFin for activities that involve banking or financial services and that relate to crypto values due to the expansion of the term financial instruments to include crypto values.”
“However, this does not provide any protection against losses.”