The European Insurance and Occupational Pensions Authority (EIOPA), together with the other European Supervisory Authorities (ESAs), has warned consumers of the risks of holding crypto-assets.

The three ESAs, which also includes the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have warned that crypto-assets are “highly risky and speculative”.

The warning comes in the context of growing consumer activity and interest in crypto-assets and the aggressive promotion of those assets and related products to the public, including through social media.

The warning is aimed primarily at retail consumers with the ESAs clearly stating that such assets are not suited for most consumers as an investment or as a means of payment or exchange.

They have warned that consumers face the possibility of losing all their invested money if they buy these assets; should be alert to the risks of misleading advertisements, including via social media and influencers; and should be particularly wary of promised fast or high returns, especially those that look too good to be true.

The ESAs also warn consumers that they should be aware of the lack of recourse or protection available to them, as crypto-assets and related products and services typically fall outside existing protection under current European Union financial services rules.

In relation to the current situation in Ukraine, and with a view to ensuring the proper implementation of the sanctions in place, the ESAs welcome the clarification by the Council of the European Union of the scope of the restrictive measures against Russian and Belarusian entities and individuals as regards crypto-assets.

In September 2020, the European Commission presented a legislative proposal for a regulation on markets in crypto-assets. The proposal provides a comprehensive framework for the regulation and supervision of issuers and providers of services for crypto-assets with a view to protect consumers and the integrity and stability of the financial system. Consumers are however reminded that the proposal remains subject to the outcome of the co-legislative process. Consumers do not currently benefit from any of the safeguards foreseen in that proposal until it is adopted and applied.

Currently, there are more than 17,000 different crypto-assets, some of them being sometimes referred to as so-called ‘virtual currencies’ or digital ‘coins’ or ‘tokens’. The most prominent crypto-assets to date include bitcoin and ether, which together represent about 60 per cent of the total market capitalisation of crypto-assets. The energy consumption of some crypto-assets is high, e.g., from mining and validation processes, and consumers should be aware of their environmental impact.

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