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Due to anonymity and the potential risks associated with cryptocurrency, the Bank of England warned that virtual currencies could become worthless in the coming years.
The Bank of England has cautioned that digital currencies like Bitcoin could become worthless in the coming years, despite their current supremacy.
Sir Jon Cunliffe, the Deputy Governor of the Bank, was behind this warning. While talking to BBC, he said that regardless of the popularity of cryptocurrencies, “their price can vary quite considerably and could theoretically or practically drop down to zero.”
However, the Final Conduct Authority (FCA) has highlighted five crucial aspects that crypto enthusiasts need to be aware of before investing in virtual assets.
The foremost risk is investor protection, as bogus investment advertisements with high returns may not be subject to strict regulations beyond basic Anti-Money Laundering (AML) requirements, thus putting clients’ money at risk. Additionally, valuing cryptocurrencies is a difficult task, due to this seasonal investors become vulnerable to great financial losses.
There is no or little guarantee that cryptocurrency can be reverted to conventional money as virtual currency is decentralized and replies to the demand and supply of the market.
Fee and charges also vary, investors must also check if their investments are worthwhile to hold after having this common factor of investing.
Crypto exchanges may also overstate the return on cryptocurrencies or understate the risk involved, thereby it is crucial to conduct comprehensive research associated with virtual assets and virtual asset service providers.
These warnings emerged right after cryptocurrency prices skyrocketed in November and unfortunately, faced massive decline after the news spread about a new variant of Covid-19.
Despite the increasing number of scams and regulatory authorities’ warnings, cryptocurrencies have attracted many businesses and celebrities. The notable names include Elon Musk, who told his followers that he wouldn’t bet the farm on cryptocurrency, but recently he announced that Tesla will accept cryptocurrency payments.
Last week, BNY Mellon, America’s oldest bank said that it would begin to finance Bitcoin and other cryptocurrencies.
“BNY Mellon is proud to be the first global bank to announce plans to provide an integrated service for digital assets,” Roman Regelman, CEO of asset servicing and head of the digital at BNY Mellon, said in a statement.
“Growing client demand for digital assets, maturity of advanced solutions, and improving regulatory clarity present a tremendous opportunity for us to extend our current service offerings to this emerging field.”
However, various researches and assumptions are made regarding cryptocurrency’s future. Various governments and financial institutions are all set to make cryptocurrencies mainstream.
Suggested read: India to Impose $2.65M Fine and Jail for Violating Cryptocurrency Bill