The total value of the digital currencies forms a sizeable market share, even though they are in their initial stages of development and recognition by investors. As a result, many of the investors have acknowledged these cryptocurrencies as potential assets that would provide favorable returns on their investment. However, the success of each investment is highly dependent on demand.
Similarly, these assets (digital currencies) will continue to gain value, as their acceptance into the economic world grows.
Due to the fact that engagement in digital currencies is not regulated by any economic institution, Financial Conduct Authority (FCA) declared that it will not regulate cryptocurrencies.
However, their previous statement on the official regulation of cryptocurrency engagement in the first week of April, sparks debate. But why are investors focusing on cryptocurrencies amidst its volatility?
>See also: UK firms announce cryptocurrency trade body in face of regulation
There are obvious reasons why each investor will engage in investment, especially if the deal seems to be lucrative. Exposure to digital currency provides them with a chance to diversify their portfolio. This is because they are not affected by the same economic aspects that impact local currency, stocks or any other commodity worth investment.
There have been declarations from different spheres that cryptocurrencies provide a futuristic approach to online transactions. Thus, as they become accepted across the globe, their demand will surely grow. Therefore, there’s still a wider window of opportunity for success and higher returns on invested funds.
However, investing in digital currency involves high speculation to avoid loss, thus making it a risky environment for investment. That doesn’t mean there are no possible returns, the risk can be compensated by higher returns potential and the speed at which potential returns could be recognised.
What the future holds after FCA’s warning to investors
FCA has warned investors to practice caution before spending their money on cryptocurrencies. Whether they are using their Amazon Gift Card or cash to buy Bitcoin, they risk losing their stake. Even though FCA does not regulate cryptos as mentioned before, the companies that provide their clients with futures, options or CFDS have to comply with both Financial Conduct Authority rules and the European Union regulations.
These regulations also relate to activities on cryptocurrency transaction processing and other derivative services that stem from Initial Coin Offerings (ICOs). Thus if your company engages in any of these services, you will need to get authorisation from FCA.
>See also: UK government plans to regulate cryptocurrency
There have been previous warnings from FCA regarding cryptocurrencies and ICOs, as being highly speculative and risky. Furthermore, anybody who does not comply with this order on authorisation will be subject to enforcement. Thus companies engaged in cryptocurrencies will have to get appropriate permission from FCA unconditionally.
As many companies and individuals continue to engage in buying, selling, trading Bitcoin, they will have to source these cryptocurrencies from authorised companies. If you are unsure whether or not your company falls into this bracket, it is important to seek professional advice from crypto experts. Moreover, the guidance on regulatory authority around PERG will be helpful to you.
The bottom line is that compliance with FCA rules and EU regulation is compulsory.