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Risk Warning - Notice to UK Users  

Estimated reading time: 2 mins

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

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 crypto assets.

The crypto asset 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.

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 crypto assets can be easily sold at any given time. The ability to sell a crypto asset 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 crypto assets at the time you want.

4.Cryptoasset investments can be complex

Investments in crypto assets 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, itprobably 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. Learn more here.

If you are interested in learning more about how to protect yourself, visit the FCA’s website here.

For further information about cryptoassets, visit the FCA’s website here.

Does the recent cryptocurrency crash pose a threat to the financial system?

Crypto crash crisis: Examining the potential impact of the recent cryptocurrency market downturn on the broader financial system.

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Since the Covid-19 pandemic, cryptocurrency adoption has increased significantly. Growing in both value and popularity, the cryptocurrency market has become submerged in the traditional financial system. In light of the recent crypto market crash, many in the broader economy have been asking whether this will have any effect on the larger global financial markets and be a threat to financial stability across all asset classes. Let’s find out. 

The Crypto Market Crash of 2022

After weeks of mediocre market performance, an unsuspecting crash caused the markets to further weaken at a rapid pace. The Terra network, operating both LUNA and UST (the stablecoin, TerraUSD) lost millions of dollars in a matter of days causing both institutional and retail investors to take notice.

The LUNA network lost a significant amount of value which resulted in the market cap going under that of UST. The LUNA coin was designed to hold the reserves which peg UST to the US dollar, so once these reserves dipped below that of the market cap of UST it became clear that the network did not hold enough reserves to support the stablecoin. Both cryptocurrencies then experienced nose dives in their value, LUNA going from highs of $119 to lows of $0.0003. 

This and the recent Celsius drama had a knock-on effect on the rest of the market, causing most crypto assets to make double-digit losses, including the Bitcoin market. In a matter of weeks the entire crypto market went from being valued at $1.294 trillion to $968 Billions. Sizable losses but a vast contrast from the highs of nearly $3 trillion just seven months ago. 

Crypto Vs Traditional Markets

While the cryptocurrency market is still relatively young, it has made considerable gains over the last few years. When compared to more traditional markets, though, it might be likened to a drop in the ocean. For example, the U.S. equity market is worth $49 trillion while the derivatives market is believed to be valued at over $1 quadrillion and the bond market at $119 trillion. 

A $3 trillion market value, while impressive for an asset class just over a decade old, doesn’t hold too much weight in comparison.

Does The Crypto Crash Pose A Threat To Greater Financial Stability?

Considering these values, the cryptocurrency market makes up only a very small percentage of the world’s wealth. However, the international Financial Stability Board, the U.S. Treasury Department, and the Federal Reserve recently flagged stablecoins as a potential threat to the financial stability internationally. 

Stablecoins are digital currencies pegged to a fiat currency, where the operating company is required to hold the equivalent amount of the fiat currency in reserve in order to maintain its 1:1 value. This is the case for both USD Coin (USDC) and Tether (USDT). 

This concern is likely to be heightened following the market crash of UST, however, most of the other stablecoins are fiat-backed as opposed to being backed by an algorithm. 

In short, no, a crypto crash is unlikely to affect the broader financial market but rather individual and institutional investors. As witnessed in the past, markets fluctuate and all crypto winters have been succeeded by bull runs. 


This article is for general information purposes only and is not intended to constitute legal or other professional advice or a recommendation of any kind whatsoever and should not be relied upon or treated as a substitute for specific advice relevant to particular circumstances. We make no warranties, representations or undertakings about any of the content of this article (including, without limitation, as to the quality, accuracy, completeness or fitness for any particular purpose of such content), or any content of any other material referred to or accessed by hyperlinks through this article. We make no representations, warranties or guarantees, whether express or implied, that the content on our site is accurate, complete or up-to-date.


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