Regulators from two countries and Tesla CEO Elon Musk are warning cryptocurrency investors to be careful. Securities and Exchange Chairman Gary Gensler said bitcoin investors are not protected, while a Federal Reserve survey of the market found that investors, brokerages, academics and political advisors see cryptocurrencies and stable coin as a potential threat to the financial system’s stability.
Meanwhile, Bank of England Governor Andrew Bailey warned that cryptocurrency investors should be prepared to lose all their money because digital currencies “have no intrinsic value.” Additionally, Musk advised people to invest in cryptocurrencies “with caution.”
U.S. regulators warn cryptocurrency investors
Gensler spoke about cryptocurrencies at the third House hearing focused on GameStop. According to Kitco, he said the SEC’s authority is “around securities and around asset managers and products that might invest in these cryptocurrencies.” He added that crypto exchanges don’t currently have any sort of regulatory framework at the SEC or the Commodity Futures Trading Commission. Gensler noted that there is no regulator or “protection against fraud or manipulation.”
CoinDesk reports that about 20% of the 24 professionals who participated in the Fed’s survey listed cryptocurrencies and stablecoins as a potential risk to financial stability. The survey was released as part of the agency’s most recent semiannual report on financial stability.
Interestingly, no one at the Fed mentioned digital currencies as a potential risk to the stability of the financial system. The last report released in November mentioned neither cryptocurrencies nor stablecoins.
The top risks listed in the survey were “vaccine-resistant [COVID-19] variants,” a “sharp rise in real interest rates” and an “inflation surge.” The Fed also stated that “valuations for some assets are elevated relative to historical norms.”
Bank of England on cryptocurrencies
According to CNBC, Bailey told reporters at a press conference that cryptocurrencies “have no intrinsic value,” so investors should be ready to lose all their money. He said that doesn’t mean “people don’t put value on them, because they have extrinsic value,” but they don’t have any intrinsic value.”
“I’m going to say this very bluntly again,” Bailey added. “Buy them only if you’re prepared to lose all your money.”
Bitcoin, ether, dogecoin and other cryptocurrencies have been skyrocketing in value this year, reminding some of the 2017 crypto bubble that sent bitcoin up to nearly $20,000 before plunging to $3,122 the following year.
Musk warns “caution” to cryptocurrency investors
Musk has tweeted about dogecoin repeatedly over the last several months, but this morning, he advised investors to “invest [in cryptocurrencies] with caution.” The Tesla CEO tweeted while taking a break from preparations to host Saturday Night Live this week. This isn’t the first time Musk has warned investors about buying cryptocurrencies.
He told TMZ earlier this year that people shouldn’t “invest their life savings” in digital currencies. However, he added that for those who “want to speculate and maybe have some fun… there’s a chance crypto is the future currency of Earth.”