
Why We Don't Provide Advice on Bitcoins and Cryptocurrency
Bitcoin and other cryptocurrencies (eg. eletherium, dogecoin) are always in the news. Elon Musk, founder of Tesla and Space X is always telling us how much cryptocurrency he has.
On the other hand, you may have noticed that we don’t mention them. We don’t talk about them anywhere on our site (apart from this blog!). We don’t talk to our clients about them or recommend them as a form of investment. Why is this? There are a number of reasons.
It’s not FCA regulated, in fact, they banned it
The Financial Conduct Authority (FCA) don’t like cryptocurrency and have banned it. The FCA does not recommend bitcoin as an investment as it considers it to be ill-suited for retail customers for a variety of reasons
These reasons include its alleged use in criminal activity, the difficulty that consumers have in understanding it, and its price volatility.
Sheldon Mills, interim Executive Director of Strategy & Competition at the FCA, said: ‘This ban reflects how seriously we view the potential harm to retail consumers in these products. Consumer protection is paramount here.
‘Significant price volatility, combined with the inherent difficulties of valuing cryptoassets reliably, places retail consumers at a high risk of suffering losses from trading crypto-derivatives. We have evidence of this happening on a significant scale. The ban provides an appropriate level of protection.’
Alleged links to financial crime
Bitcoin has always been linked to criminal activity, early in its inception it was linked to the Silk Road (a black market on the dark web) that sold drugs and other illegal items. More recently there have been thefts of Bitcoins during exchange transactions due to hacking and phishing.
It’s almost impossible for a lay person to understand what Bitcoin is
The process of mining, networking, exchanging and buying cryptocurrencies is incredibly complicated. There are many terms and concepts used (eg. blockchain) and it is difficult to understand what they mean. So therefore, investors cannot be expected to grasp fully what they are investing in and this is one of the main reasons cited for the FCA ban.
Environmental Impact
Finally, Cryptocurrency is also not good for the environment. As it is not a physical currency, instead, it is encrypted, held digitally and recorded (‘mined’) in something called a blockchain. The power requirement for the computers performing the mining process is huge. For example, research done by the University of Cambridge estimated that the total power required to mine bitcoin was more than the energy used by the whole country of Argentina
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If you would like to speak to one of our Independent Financial Advisers about investing, or any other aspect of financial planning then please contact us or call 01257 260011.