The Financial Supervisory Authority of Norway, locally known as Finanstilsynet, has become the latest regulator to issue a warning against cryptocurrencies, citing trading risks as well as booming scams.
The warning from the nordic regulator came when more and more retail consumers are investing in cryptocurrencies and considering them as new savings and investment alternatives.
“Most cryptocurrencies are subject to extreme price fluctuations,” wrote Jo Gjedrem, Consumer Coordinator at Finanstilsynet. Indeed, cryptocurrencies have shed a major chunk of their market value recently due to China’s extended crackdown on the local crypto mining industry.
Additionally, he pointed out that the risk of losses with crypto investment is high and ‘price formation is in many cases not transparent.’ Some earlier reports have accused major exchanges of their involvement in wash trading, but those industry traits are believed to have trimmed significantly.
Cryptos are Vulnerable
In addition, the Norwegian regulator is concerned about the growing scams involving cryptocurrencies. “Scammers use spam, computer viruses, fake drawings and a variety of other techniques to deceive consumers.”
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Finanstilsynet’s warning followed other regulators like the United States Securities and Exchange Commission (SEC) and UK-based Financial Conduct Authority (FCA) in issuing warnings to crypto investors.
“Cryptocurrency is largely unregulated,” the Norwegian financial watchdog stated. “In stark contrast to regulated savings and investment products, there is no statutory consumer protection for buyers of cryptocurrencies.”
Furthermore, it pointed to many cryptocurrency platforms that falsely advertised to be regulated by Finanstilsynet when it does not even regulate the industry.
“This is very misleading,” the regulator added. “The platforms have a duty to notify Finanstilsynet in accordance with the money laundering regulations, but apart from money laundering supervision, Finanstilsynet does not supervise these actors.”
The Norwegian regulator now proposed strong regulations for the cryptocurrency industry in accordance with the suggestions made by the European Commission.
“There is a strong need for a legal framework and investor protection if cryptocurrency is to be able to become a suitable form of investment for consumers,” Finanstilsynet continued. “Until such regulations are in place, anyone considering trading in cryptocurrency should think carefully and understand the significant risk that such investments entail.”