What are the key risks?

• 1.

  You could lose all the money you invest

  The performance of most cryptoassets can be highly volatile, with their value dropping as quickly as it can rise. You should be prepared to lose all the money you invest in cryptoassets.

  The cryptoasset market is largely unregulated. There is a risk of losing money or any cryptoassets you purchase due to risks such as cyber-attacks, financial crime and firm failure.

  Stability is not guaranteed.

• 2.

  You should not expect to be protected if something goes wrong

  The Financial Services Compensation Scheme (FSCS) doesn’t protect this type of investment because it’s not a ‘specified investment’ under the UK regulatory regime – in other words, this type of investment isn’t recognised as the sort of investment that the FSCS can protect. Learn more by using the FSCS investment protection checker here. 

  The Financial Ombudsman Service (FOS) will not be able to consider complaints related to this firm. Learn more about FOS protection here.

• 3.

  You may not be able to sell your investment when you want to

  There is no guarantee that investments in cryptoassets can be easily sold at any given time. The ability to sell a cryptoasset depends on various factors, including the supply and demand in the market at that time. 

  Operational failings such as technology outages, cyber-attacks and comingling of funds could cause unwanted delay and you may be unable to sell your cryptoassets at the time you want.

• 4.

  Cryptoasset investments can be complex

  Investments in cryptoassets can be complex, making it difficult to understand the risks associated with the investment.

  You should do your own research before investing. If something sounds too good to be true, it probably is.

• 5.

  Don’t put all your eggs in one basket

  Putting all your money into a single type of investment is risky. Spreading your money across different investments makes you less dependent on any one to do well. 

  A good rule of thumb is not to invest more than 10% of your money in high-risk investments.

• Stablecoins

  Stablecoins are a type of cryptoasset that aim to maintain a stable value by referencing another asset, most commonly a fiat currency such as the US dollar. Cryptoassets are considered by the FCA to be high-risk investments. Stablecoins are not protected by the Financial Services Compensation Scheme (FSCS).

  Stablecoins use different mechanisms to try to maintain their value. These mechanisms vary and carry different risks.

• Keys risks include:

  Counterparty risk
  Where a stablecoin is backed by assets held by a third party, you rely on that party to manage and safeguard those assets. If the third party fails or becomes insolvent, the stablecoin may lose value.

   

  Redemption risk

  Some stablecoins claim to be redeemable for underlying assets. There is a risk that redemption may be delayed, restricted, or unavailable, particularly during periods of market stress or due to operational issues.

   

  Collateral risk

  The value of the assets backing a stablecoin may fall or become volatile. This risk is higher where the backing assets include other cryptoassets rather than cash or cash-equivalent assets.

   

  Foreign exchange (FX) risk
  Many stablecoins are denominated in US dollars. If you are a UK consumer, movements in the USD/GBP exchange rate may affect the value of your holdings when converted into pounds sterling.

   

  Algorithmic risk
  Some stablecoins rely on algorithms to maintain their value rather than backing assets. These mechanisms may fail or behave unexpectedly, which could result in a rapid loss of value.

• Worldcoin (WLD)

  WLD is a cryptoasset associated with the World project. Learn more about risks at World.org.