These days, it feels like talk of cryptocurrency is everywhere. It can be easy to think that cryptocurrency is a straightforward investment, with adverts saying “It’s time to buy” and “Be your own bank.” However, cryptocurrency is a lot more complicated than one might first think, and as with any investment, it’s important to be aware of the risks and dangers.
At The Salary Calculator, we’ll guide you through:
- What cryptocurrency is
- What Britcoin is, and what the Bank of England’s consultation means
- Why you should be wary of cryptocurrency
- How to keep your wits about you
What is cryptocurrency?
Cryptocurrency is a form of digital currency which is typically decentralised and with which people can use to make transactions and invest. However, what makes it unique is that it is secured by cryptography, meaning that transactions are entirely untraceable, and you don’t need a third party, like a bank or credit card company, to oversee purchases.
The most well-known form of cryptocurrency is Bitcoin which was created back in 2009 and uses peer-to-peer technology, allowing users to buy or sell directly with another user. It uses blockchain technology, which is also known as Distributed Ledger Technology (DLT).
As of 2021, there are reportedly 300 million crypto users across the globe.
What is Britcoin?
The Bank of England has reportedly launched a consultation into Britcoin, Britain’s own digital currency. That said, it would not technically be a cryptocurrency because, unlike Bitcoin, it would be issued by the bank.
As a result, Britcoin would be a Central Bank Digital Currency (CBDC), and, as outlined by the Bank of England, £10 of Britcoin would hold the same value as a £10 note.
Speaking about the consultation, the bank’s deputy governor for financial stability, Jon Cunliffe, said: “The plan to publish a consultation next year on CBDC is a crucial step in our policy development, especially as we further our thinking on the pressing issues at hand.”
“What it will do is provide a platform for interested parties and relevant groups to engage with the key questions on the merits of CBDC, and whether the public sector should advance to a development phase.”
England isn’t the first place to be exploring the possibilities of this kind of digital currency; the Bahamas has the Sand Dollar, while China launched pilots of CBDC in 2020.
According to the Bank of England, there will be no launch before 2025.
Why you should be wary of cryptocurrency
There are a number of reasons why you should be wary of cryptocurrency. One key aspect of cryptocurrency is that it is incredibly volatile. While, on the 10th November, Bitcoin reached an all-time high reaching above $68,000, on 16th November, there was a market-wide crash, whereby the overall crypto market dropped by over $200 billion to approximately $2.6 trillion.
It’s also important to note that cryptocurrencies are unregulated, which means that there’s no watchdog or regulator to oversee the security of transactions and guarantee safety and security – which is another issue.
Although cryptocurrency is decentralised, meaning you own your own money, crypto exchanges and hot wallets (cryptocurrency wallets) can be hacked, and hacks happen all the time. This is why, when trading, it’s important to have a ‘cold wallet,’ too, which can’t be accessed through the internet.
Cryptocurrency ads and keeping your wits about you
You may have found yourself noticing more and more advertisements for cryptocurrency. With these advertisements becoming more mainstream, appearing on TfL buses and trains, one may believe these are regulated, conventional and safe forms of investment.
It’s for this exact reason that the Advertising Standards Authority (ASA) banned advertisement from crypto exchange service, Luno, which told people it was “time to buy.” Explaining the reasoning behind its decision, the ASA said: “We understood that bitcoin investment was complex, volatile, and could expose investors to losses and considered that stood in contrast to the impression given by the ad, that investment was simple and conventional.”
Adding: “We concluded that the ad irresponsibly suggested that engaging in bitcoin investment through Luno was straightforward and easy, particularly given that the audience it addressed.”
Now, further appeals for bans of crypto ads have been made, especially in relation to TfL posters advertising Floki Inu, another crypto product. Advertisements for this product ran for three weeks, and TfL has admitted that they do not know who is behind the funding of the posters.
If you decide you want to take things further with cryptocurrency, here are some tips on how to keep safe:
- Research, research, and research some more. Keep up-to-date with cryptocurrency exchanges, and even reach out to experienced investors for guidance and advice.
- Diversify. Putting all your money into cryptocurrency, especially considering how volatile it is, is potentially very dangerous. Make sure you don’t get caught out.
- Look into different cryptocurrency wallets to ensure your investments and purchases are safe or as safe as they can be.
