FI Supervision Report 21: Financial instruments with crypto-assets as underlying asset

FI conducted a thematic review of the market for financial instruments with crypto-assets as an underlying asset. FI is of the view that there is a lack of adequate consumer protection regulation for crypto-assets. Valuing them is also challenging and the instruments are volatile. This makes the products unsuitable for most, if not all, retail consumers.

FI has previously warned consumers and firms of the risks involved in trading crypto-assets. This trading is volatile, the firms involved face operational risks, and there is a lack of adequate consumer protection regulation. We have also issued warnings regarding so-called Initial Coin Offerings (ICOs), a type of financing using crypto-assets, which are usually not covered by prospectus regulation rules or subject to information standards.

These risks are equally relevant when it comes to investing in financial instruments with underlying crypto-assets. The instruments are volatile and difficult to value. They are affected by the risks associated with their underlying assets - there are problems with the transparency of the markets for the underlying crypto-asset, and crypto-assets are frequently used for money laundering and terrorist financing.

Financial instruments with underlying crypto-assets are therefore unsuitable for most, if not all, retail consumers.

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