New Zealand Financial Regulator Issues Warning on Cryptocurrencies
The New Zealand Financial Markets Authority (FMA) has issued a warning to citizens regarding crypto-assets. This comes a day after the UK Financial Conduct Authority raised similar concerns about the cryptocurrency markets.
Cryptocurrencies Considered High Risk and Volatile Assets
This latest warning from the FMA was revealed by local publication the NZ Herald. According to the report, a spokesperson from the FMA warned New Zealanders to be wary of purchasing cryptocurrencies. Citing the high risk and volatility of crypto assets, the FMA believes scammers often exploit these assets.
The regulatory body further stated that the lack of regulation on many crypto exchanges makes it difficult to trace illicit transactions. It further advised citizens to ensure that exchanges used are registered on the Financial Service Providers Register (FSPR). This is to ensure that they can access a dispute resolution scheme should their funds go missing.
The body also revealed that cryptocurrencies are not regulated in New Zealand, and users should ensure that exchanges hold New Zealand dollars (NZD) in a trust account.
Crypto Market Still Possesses Risks Despite Recent Gains
It is no surprise that more financial regulators are issuing warnings about cryptocurrencies and digital assets. The massive bullish run has witnessed a major upturn in the popularity of crypto-assets, especially Bitcoin. There has been huge coverage on the leading asset movement that increased by more than 300% in 2020. The recent dip in the market highlighted the dangers of cryptocurrencies, with more than $200 billion wiped from traders.
The crypto market is still fairly young, and the lack of regulations means many shoddy projects. A recent report from crypto risk assets firm, Elliptic shows that criminals are still using privacy wallets to hide stolen bitcoins. Simultaneously, there have been cases of scammers using pictures of celebrities to promote fake projects.
Nevertheless, cryptocurrencies represent a revolutionary form of finance that will only improve payment systems in the future. Regulators across the world have no option than to adapt to this rapidly growing industry.