The Financial Markets Authority (FMA) warned New Zealanders about the risk of investing in cryptocurrencies, their high volatility, and the lack of industry regulation in the region.
The FMA said New Zealanders who have considered buying cryptocurrencies should be aware that these are “high risk and highly volatile” assets.
“Cryptocurrencies are not regulated in New Zealand and are often used by scammers and hackers,” said an FMA spokesman.
Earlier this week, the UK Financial Conduct Authority (FCA) posted a similar warning on its website. The regulator said consumers must be prepared to lose “all their money” if they decide to invest in cryptocurrency products that promise high returns.
“The FMA shares FCA’s concerns that some cryptocurrency exchanges are promising high returns and clients must be prepared to lose all their money,” added an FMA spokesman. “Many overseas cryptocurrency exchanges are not regulated, operate exclusively online, and have nothing to do with New Zealand. This makes it difficult to determine who offers, exchanges, buys or sells cryptocurrencies. ”
According to an FMA spokesperson, if an investor plans to buy cryptocurrency, they must at least make sure the exchange is registered with the Financial Service Providers Registry (FSPR), which gives access to a dispute resolution scheme.
“You should also check if the exchange holds your New Zealand dollars in a trust account,” he added.
Recall that two years ago, the New Zealand exchange Cryptopia was hacked. After the hack, the research company Elementus estimated that the site lost $ 16 million in cryptocurrencies as a result of the attack. Grant Thornton, the liquidator of the closed Cryptopia exchange, began the process of filing claims for damages to users in December 2020.