The risks of crypto, in regulators’ words

By the Blockhorizon Editorial Team · Updated 2 October 2026 · How we check facts

Anyone selling crypto has a reason to play down the risks. Financial regulators do not. This page sets out the main risks of crypto using the words of the UK Financial Conduct Authority (FCA), the US Securities and Exchange Commission (SEC), the EU’s three financial supervisors (EBA, ESMA and EIOPA, together called the ESAs) and US crime and consumer data. Where we quote, the words are theirs.

How much can crypto prices fall?

A lot, and quickly. The ESAs warned in October 2025 that the value of most crypto-assets can be very volatile and that “their price can fall and rise quickly over short periods of time.” The FCA puts it more simply: crypto-assets “are all high risk and speculative as an investment.”

The FCA gives its own examples, in pounds sterling, of falls from a peak to 1 December 2025:

Put in money terms, the FCA says £300 put into Bitcoin at its peak was worth £208.68 by 1 December 2025, and £300 put into Ethereum was worth £172.53. Note that the Bitcoin fall took less than two months. Tether is a stablecoin — a coin designed to hold a steady value — yet it still appears in the FCA’s list of falls.

Could you lose all the money you put into crypto?

Yes. The FCA says: “If you decide to invest in crypto then you should be prepared to lose all your money, for any one of a variety of reasons”. The ESAs say you “may lose a lot, or even all, of the money invested.”

Since 8 October 2023, UK crypto promotions must carry a risk warning in wording set by the FCA. The FCA’s example reads: “Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more.”

A risk warning is not a stamp of approval. The FCA’s own wording tells you not to expect protection.

The SEC’s rule for any speculative investment is the same: “The only money you should put at risk with any speculative investment is money you can afford to lose entirely.”

Will anyone compensate you if something goes wrong?

Usually not. This is one of the biggest differences between crypto and money in a bank or a regulated investment account.

• UK: the FCA says “crypto is largely unregulated in the UK, so it is highly unlikely you will be covered by the Financial Services Compensation Scheme”.
• US: the SEC says the investor protection that covers registered brokerage accounts does not reach crypto firms: “There are no such protections for accounts that you place with crypto asset entities.”
• EU: the EU’s MiCA rules have been fully applicable since 30 December 2024, but the ESAs say MiCA protections are not as extensive as for traditional financial products and “you will not benefit from compensation schemes”.

What happens to your crypto if a platform fails?

If a company holds your crypto for you, its problems become your problems. The SEC’s December 2025 custody bulletin says: “If the third-party custodian is hacked, shuts down, or goes bankrupt, you may lose access to your crypto assets.”

The SEC’s 2023 alert describes what had already happened: a number of crypto firms faced severe financial difficulties, “sometimes resulting in suspending customers’ ability to withdraw their assets.” Some entered bankruptcy, and “it is unclear how much of their holdings (if any) customers might be able to recover.” It adds that depositors “might cease to have legal ownership of those assets”.

Our guide to what a crypto exchange is explains custody in more detail.

What if you lose your private keys?

Then the coins are gone. Holding crypto yourself avoids platform risk but creates key risk. The SEC says: “Once created, a private key cannot be changed or replaced. If you lose your private key, you permanently lose access to the crypto assets in your wallet.”

The ESAs say the same: “Losing private keys to crypto-assets results in the permanent and irreversible loss of access”. Unlike a password, a lost private key cannot be reset by anyone. See crypto wallets and private keys.

How big is the risk of crypto scams?

Large, and growing. In its 2025 report, the FBI’s Internet Crime Complaint Center (IC3) recorded 181,565 crypto-related complaints with reported losses of $11.366 billion — up 22% on 2024. Crypto investment fraud alone accounted for $7.228 billion. People aged 60 and over reported more than $4.3 billion in crypto-related losses, more than any other age group.

The US Federal Trade Commission (FTC) told Congress in March 2026 that investment scams were the top fraud category in 2025, with over $7.9 billion reported lost, and that only bank payments carried higher total losses than cryptocurrency.

These figures count only losses reported to the FBI or the FTC, so they do not show every loss. They are separate datasets with different scopes and should not be added together. The US Commodity Futures Trading Commission (CFTC) adds a hard truth: “If fraud or theft occurs, you may not be able to get your money back.” Learn the red flags of crypto scams.

Does regulation make crypto safe?

No. Rules set standards for how authorised firms behave, but they do not stop prices falling. The ESAs say the value of most crypto-assets, “including some that are regulated, can be very volatile”, and that under MiCA “most crypto-assets typically remain volatile and highly risky.”

The ESAs also warn about online promotion: “influencers can be incentivised to advertise certain crypto-assets.” A confident video is not independent advice.

What do regulators say to do before buying crypto?

Pulling their guidance together:

• Only use money you can afford to lose entirely (SEC, FCA).
• Check the firm is authorised on the official register in your country — not via a link the firm sends you. Our guide on checking if a crypto firm is authorised shows how.
• Treat bonuses as a warning sign in the UK. The FCA says real crypto promotions should show prominent risk warnings and no free gifts to join or refer-a-friend bonuses; a firm that breaks this “could be illegal, or even a scam.”
• Understand who holds your keys before you deposit anything (SEC).
• Beware promises of quick wealth. The CFTC says: “There is no such thing as a guaranteed investment or trading strategy.”

Blockhorizon is an education site. Nothing here is a recommendation to buy, sell or hold any crypto-asset.