One of the U.K.’s finance regulator has warned consumers about a particular kind of derivative contract based on cryptocurrencies.
In a release on its website, the U.K. Financial Conduct Authority (FCA) cautioned would-be investors in cryptocurrency contracts-for-differences, or CFDs. Under a CFD, the two parties involved agree to pay either side in the event that the underlying value of an asset – in this case, an amount of cryptocurrency – changes over time.
These products allow users to speculate on the prices of different assets, and while cryptocurrencies fall under this umbrella, they ought to be considered very risky products, according to the agency.
CFDs fall under the purview of the FCA meaning that companies offering such products are within the agency’s jurisdiction. Legal safeguards aside, the agency warned that “these protections will not compensate you for any losses from trading.”
The agency said:
“Cryptocurrency CFDs are…