Investments in cryptocurrency are becoming increasingly popular. Many such investments have been doing extremely well lately, with Bitcoin leading the way. The cryptocurrency market is at the cutting edge of financial technology and has created a real buzz, which is attracting both amateur and professional investors to spend billions of pounds each year. However, crypto investment can come with huge risks, which all investors should be aware of before looking to purchase cryptocurrencies.
A crucial starting point for all speculative investors is to be aware that unlike legal tender issued in England, cryptocurrencies are not backed by any government authority. This means the consumers cannot (at the present time) access any FCA compensation scheme for cryptocurrency losses due to fraud. Investors, therefore, need to be thorough with their due diligence as it is their responsibility to check the nature of all investments.
This is even more so in the current climate – fraud is on the rise, especially within the financial and banking sector, and cryptocurrency investments are ripe hunting ground for fraudsters who are making the most of its growing popularity and unregulated status.
Investors need to ensure they properly understand the investment they are making and carry out the appropriate due diligence on the scheme/end investment. The risk is entirely on the investors, with no formal protection in place if they take the wrong gamble. There has been a significant rise in crypto scams, with many wallets held on the blockchain being fed into scam companies, and the wallets emptied and stolen.
Financial institutions must maintain certain protection activities against money laundering and fraud, the transmission of funds, and more. New types of wallets are being released all the time, and while cryptocurrency exchanges are always improving their security measures, investors have so far not been able to fully eliminate the legal risks associated with owning cryptocurrencies, and it is likely that they never will.
Organisations are becoming more sophisticated with the services they can offer crypto holders. Digital assets are becoming increasingly popular amongst businesses, as well as individual investors, with many businesses now accepting collateral in the form of cryptocurrencies. The modern business world leans heavily on the success of the cryptocurrencies.
Will borrowers soon demand these types of service from their banks? The potential implications of cryptocurrencies are massive. The banking industry was historically resistant, in large part, to this technical disruption. However, that is beginning to change due to the development of blockchain technology.
As we are moving towards a world when we can buy products using cryptocurrency, this means that crypto holders may start using their crypto wallets on a blockchain platform to buy products, raise loans, use faster payments, etc., so it is more akin to a bank account. If anything, though, having this multifaceted platform in which to conduct a range of matters, only amplifies the need to protect investments.
The reality is that cryptocurrency is here to stay, and it is hugely successful. Banks need to prepare for a more permanent change towards this type of investment. However, given the risks involved, and the importance of our banking services for the economy, it is a move not to be taken lightly.
HENRY IS THE CHAIRMAN OF Cypher Tracer, HAVING PREVIOUSLY SERVED AS THE CONSERVATIVE MP FOR NORTH WEST NORFOLK FOR MORE THAN 30 YEARS BEFORE BEING APPOINTED TO THE HOUSE OF LORDS IN 2020.
J. Brent Williams is currently the founder, President and CEO of Euclidian Trust. He founded Euclidian Trust after boot-strapping his last entrepreneurial endeavour, 
Andrew Day has been a qualified solicitor for 15 years, having trained at a city law firm and then ultimately becoming a partner and director of a boutique dispute resolution firm. He has been a key advisor to C-suite decision makers, in-house counsel and family office teams in the strategic control and direction of complex and sensitive disputes. Andrew was responsible for the creation and management of a disruptive collaboration model between the law firm and external experts. The aim was to supply asset tracking and recovery with an intelligence gathering capability, which was developed into a revenue generative service line and a spin-off consultancy. Andrew left the law firm in late 2018 and now works as a consultant to advisory businesses to bring the multi-disciplinary approach to niche areas of claims and advisory work. Andrew was engaged by M2 in early 2021 to help drive the development of client pipeline and products, and with the management of its asset recovery offerings. 
Julian started his career at GNI Ltd in 1982 where he spent 15 years working in and eventually running their Financial Futures division. In 2001, after the sale of the company to Old Mutual, he was appointed CEO of GNI, which employed over 450 staff globally at that time. In 2002, GNI was sold to Man Financial and in 2003 Julian left to become CEO of Fleming Capital Management, a hedge fund seeding platform established by Fleming Family and Partners, the largest multi-family office in the UK. FCM built AUM to c. $500m by 2008 in 4 equity long/short funds but in 2012, a strategic change of direction led to the business being closed and Julian became a consultant to FF&P Corporate Advisory Group. In 2015, following the merger of FF&P with Stonehage, Julian left to establish his own consultancy business, focussing on aiding smaller companies with their strategic direction and capital raising. In 2019, Julian joined London and Oxford Group as Chairman.
Hemant has been a member of the Institute of Chartered Accountants in England and Wales (ICAEW) since 1988. Hemant assists in the financial control, ensuring that financial, governance, and business decisions are compliant. Hemant looks after the marketing budgets, develops financial projections and plans to ensure the prudential requirement is met.