CRYPTOCURRENCIES are creating a stir again with amateur traders on Reddit pushing up prices.
Ripple’s XRP is one of them and like any investment, there are risks involved – here’s what you need to know about buying the cryptocurrency.
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It also highlighted the lack of protection if something goes wrong.
When you put your money into a savings account with a bank and it goes bust, you’re usually covered by the the Financial Services Compensation Scheme (FSCS) up to £85,000.
But this is unlikely to be the case when you buy XRP and other cryptocurrencies.
And if you have a problem with a financial product you can usually complain to the Financial Ombudsman Service (FOS).
And it’s unlikely that you could escalate a problem to them related to cryptocurrencies because it typically only covers traditional savings and investments.
Scammers are also out there trying to part you and your cash.
They’ve been known to promise high-return cryptocurrency investments and instead steal your cash, often using social media accounts and adverts to lure people.
If you do decide to buy XRP or other cryptocurrencies, make sure you are using a legitimate platform or company with a good reputation.
Cryptocurrencies themselves are not regulated because no one is responsible for issuing them (they are “mined” via a computer).
But firms offering cryptoassets must now be registered with the FCA , and anyone who does invest in cryptocurrencies should check before investing.
A risk of investing in crypto with even these legitimate platforms is that they can restrict trading, like Robinhood did last week with GameStop shares.
Robinhood is not yet in the UK but there are a number of other similar apps and platforms where you can buy a range of cryptocurrencies.
Tom Stelzer, investing expert at personal finance comparison site finder.com said: “The danger of buying cryptocurrencies on platforms like Robinhood is that you don’t actually own the underlying asset.
“This means that if you want to move your coins, you won’t be able to do so, and if Robinhood decides to restrict trading at any point, you may find you’re unable to sell when you want.”