South African FSCA issued a “Crypto health warning” on Thursday following growing crypto scams. Financial watchdog has cautioned potential investors to do their own due diligence before putting their funds in high-risk crypto Investments.
The agency, which oversees financial markets in South Africa, has warned investors that cryptocurrency investments are not regulated by FSCA and they should be prepared to lose all their money if something goes wrong.
Per the press release,
“The FSCA is receiving a large number of complaints from South African investors who have lost their savings through investing in a crypto-related investment that they did not understand, or a scam packaged as a crypto investment promising unrealistic high returns.”
FSCA Highlights Risks Involved with Crypto Investment
FSCA further underlined the risks associated with cryptocurrency investments.
Unrealistic High Returns : The Crypto investment firms misrepresenting the unrealistic high returns and hide the risks associated with them.
No Underlying Basis for Price Determination : The cryptocurrency market is highly driven by investors sentiment with no underlying basis which makes it easy for Ponzi scheme operators to create FOMO to attract new investors.
High Price Volatility: The price volatility in crypto assets are at even higher risks to investors.
FSCA Moves for Crypto Regulation
The Financial Sector Conduct Authority firm to tighten regulatory control over cryptocurrency following high risks and scam activities associated with crypto assets. The unregulated firms lured investors by marketing high returns on crypto assets without highlighting the risk. . FSCA to roll out measures to regulate some aspect and players of cryptocurrency market in coming months. The south African regulatory is working with Intergovernmental Fintech Working Group (IFWG) to regulate crypto assets in South Africa.
The recent action to impose strict regulation came after the crash of the largest ponzi scheme of South Africa, Mirror Trading International (MTI) which duped around 28,000 investors. The fraudulent scheme projected highly lucrative offers like at least a 10% return on investments every month.
Rise in Scam Amid Crypto Bull Market
The price of the world’s largest cryptocurrency, bitcoin, has more than multiplied in the past year. With 2020 being one of the best years for crypto, Cybersecurity experts warned of a rise in crypto frauds. The crypto exchanges across the world have suffered high-profile hacks, while DeFi hacks accounted for more than 20% of the total theft volume in 2020. Experts believe that this will continue during 2021, also we may witness crypto frauds, including fake crypto investment platforms, crypto wallet scams, malware targeting least-known cryptocurrencies and crypto-jacking.