Three European financial regulatory authorities – the European Securities and Markets Authority (ESMA), the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) – have issued a warning on the risks involved in digital currency investments.

The regulators have issued the warning in the light of rising number of customers buying cryptocurrencies, without fully understanding the risks involved.

“The three ESAs warn consumers that VCs can be extremely risky and are usually highly speculative. If you buy VCs, you should be aware that there is a high risk that you will lose a large amount, or even all, of the money invested,” the regulators said.

They further outlined the risks involved which includes extreme volatility and bubble risk, lack of protection for customers, lack of exit options, lack of price transparency, operational disruptions, misleading or incomplete information, and unsuitability of cryptocurrencies for most purposes, including investment or retirement planning.

The regulators cautioned customers saying:

“If you decide to buy VCs or financial products giving direct exposure to VCs, you should fully understand their characteristics and the risks you take. You should not invest money you cannot afford to lose. You should make sure that you maintain adequate and up to date security precautions on the devices and hardware you use for accessing your VCs or for buying, storing or transferring VCs. Also, you should be aware that buying VCs from a firm regulated for financial services does not mitigate the above risks.”