FCA Highlights Risks Of Cryptocurrency CFDs

November 14, 2017 9:37 PM

Cryptocurrency “contracts for differences” are the latest product to vex the UK’s financial regulator. High leverage, price volatility, and varied fee structures make cryptocurrency CFDs “extremely high-risk, speculative products,” cautioned the FCA.

On November 14, 2017, the United Kingdom’s Financial Conduct Authority issued a consumer warning about the risks of investing in cryptocurrency contracts for differences (CFDs). At its core, a CFD is a financial instrument that allows a person to speculate on the price of an asset without actually owning the underlying asset. This is akin to betting on horse races – you don’t own the horse, you just gamble on the beast’s performance.

So, what are cryptocurrency CFDs? Per the FCA, “Cryptocurrency CFDs allow investors to speculate on a change in price of a virtual currency such as Bitcoin or Ethereum, which have proved volatile. The CFDs can have little price transparency, come with high charges and…

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