The three financial regulators of the European Union (EU) issued strong warnings on Thursday about the risks of crypto assets such as Bitcoin.

In a joint press release, the banking regulator EBA, the insurance and pension fund regulator EIOPA and the securities and markets regulator ESMA stated that many crypto assets are very risky and speculative.

They are not suitable for most end consumers as a financial investment or as a means of payment or exchange.

Markus Fruehauf

Editor in Business.

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Financial regulators base their current warning on increasing consumer activity and interest in crypto assets, as well as aggressive public promotion of them.

There is a real possibility for consumers to lose all their money invested if they buy these assets.

"You should be vigilant about the risks of misleading advertising, including through social media and influencers," read the message from the EU regulators.

In her view, consumers need to be extra cautious when a product promises fast or high returns, especially ones that seem too good to be true.

Information campaign on social media

The three EU authorities have therefore launched a joint information campaign via social media at the same time.

In the case of crypto assets, consumers often find it very difficult or impossible to assert claims for damages or other legal claims.

Because these and related products and services usually do not fall under the existing protection of the current EU regulations for financial services.

They are also not protected by the banks' deposit guarantee schemes.

The EU supervisors consider the extreme price fluctuations to be one of the greatest risks.

The price of what is by far the best-known crypto asset, Bitcoin, has fluctuated between $30,000 and $60,000 over the past twelve months.

Bitcoin is currently trading at $41,000.

According to regulators, many crypto assets are subject to sudden and extreme price swings and are speculative, as their price often depends solely on investor demand.

They attribute this to the possible lack of other assets or tangible assets to back it up.

They are also concerned about misleading information.

Some crypto assets and related products are aggressively promoted using marketing materials and other information that may be unclear, incomplete, inaccurate, or even intentionally misleading.

For example, social media advertising may be condensed with a focus on the potential rewards but not the high risks involved.

In addition, the supervisors see the risk of market manipulation because the price setting and transactions on trading platforms are often not transparent.