Categories: News

UK Regulator Issues Warning on Trading Digital Currency CFDs

Recently, digital currency contracts for differences, also known as CFDs, have become more and more popular thanks to an increased marketing effort on the part of providers. Because of this, the UK Financial Conduct Authority (FCA) has decided to issue a warning pertaining to the possible risks that investors expose themselves to when trading CFDs.

Understanding the CFD risks

Digital currency CFDs are complex financial instruments allowing investors to speculate on the possible changes in coin prices. Most of the time, CFDs are offered with leverage, which means that investors are only required to invest a portion of the total value of assets being traded. However, the existence of large leverage considerably increases the impact that a price change could have on both profits and losses. In other words, if traders don’t speculate well, they can quickly lose their money due to volatility.

According to the FCA, trading CFDs poses several risks, such as volatility, leverage, charges, funding costs and price transparency. Therefore, in the opinion of the FCA, digital currency CFDs are both high-risk and extremely speculative financial instruments.

CFD traders in the UK are protected by the FCA, as the financial regulator oversees the activity of firms offering these trading instruments. However, the FCA has once again pointed out that it cannot offer any compensation to individuals who lose money from trading these instruments.

Based on these points, do you consider CFDs to be high-risk investments? Let us know your thoughts in the comment section below.

 

Daniel Dob

Daniel is a bitcoin investor and journalist for numerous news outlets in the financial sector. When he's not writing, trading, or interviewing people, you can find him swimming, reading or taking one of his hobbies to the next level.

Recent Posts

XRP Price: 6% Setback may Reverse Course Later This Week

As was to be expected after a few days of positive momentum, things are returning to normal for all cryptocurrency…

3 hours ago

Top 5 Cryptocurrency Jobs Right Now

We all know that cryptocurrency is a growing industry. And we're aware that blockchain tech has the potential to save…

11 hours ago

Tezos Foundation to Issue Grants for Research and Development of Its Protocol

The Tezos Foundation will accept proposals from developers who seek to carry out research and development of its protocol. The…

12 hours ago

What Is TaTaTu Cryptocurrency?

Over the past few years, people have become aware of the fact that their personal data is often used by…

13 hours ago

The Struggle Continues for Ripple as More Key Companies Snub It

Ripple and Coinbase have had a long history, one that has involved a lot of heartbreak for XRP enthusiasts. With…

14 hours ago

Binance Celebrates Its First Anniversary as Its Dominance Continues

Binance has become synonymous with the crypto exchange industry. It has become almost impossible to mention the industry without paying…

15 hours ago