Press Release

Consumer Warning on risks of investing in Contract For Differences in Virtual Assets

What are Virtual Assets?

Virtual assets more commonly referred to as crypto assets/ crypto currencies, refer to any digital representation of value that can be digitally traded, transferred or used for payment, but excluding digital representation of fiat currencies, securities, and other financial assets.

What are Contracts for Differences (“CFD”)?

CFD is a leveraged product which is traded over the counter. This can be for a long or short position contract, where the person investing and the dealer (the person making the offering) agree to exchange the difference in the open and closing prices of the underlying asset, with no transfer of ownership of the underlying asset, which in this instance would be the Virtual Asset.
These assets can range from, but not limited to, stocks, indices, foreign exchange, commodities, and now increasingly virtual assets.

What are CFDs in virtual assets?
CFDs in virtual assets allow investors to speculate on a change of price in a virtual asset for example Bitcoin or Ethereum.
It is important to keep in mind that virtual assets may not be issued or backed by a central bank or government, and are subject to significant price volatility which can lead to significant losses which may exceed the amount invested.

What are the risks?
Common risks associated include:
1. Price volatility:- The value of virtual assets being extremely volatile, render the value of the CFD volatile in turn. Same may be subject to rapid changes stemming from global events or market changes.
2. Charged and funding costs:- Charges associated with these types of CFDs may be higher than other CFD products. Same may vary between firms and should be taken into consideration on the likelihood of a profit, whether significant or not, being made.
3. Price transparency:- Differing from fiat currencies, crypto and virtual assets in general, experience significant variations which is used to determine the value of the CFD position. The shifting nature of VA may result in a CFD offering which is not reflective of the actual value of the underlying virtual asset, at the time the contract is entered.

The Financial Services Authority reminds the public, actual and potential investors to take due care when engaging in investment of any kind; and reminds all persons, to consider whether these products are right for you before entering into any trades.

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