Cryptocurrencies have attracted enormous attention over the past months and generated much excitement including from investors with limited knowledge of financial products. Cryptocurrencies are digital currencies that are issued by private entities or individuals and use sophisticated digital files as representation of value. They do not physically exist and do not have legal tender status. The Central Bank of Eswatini (CBE), advises consumers to act with extreme caution and to be mindful of the potential risks should they invest in, trade, and hold cryptocurrencies such as Bitcoin. The CBE is concerned that the recent price escalations may attract members of the public to invest in cryptocurrencies without understanding the potential risks.
The CBE has been following developments in the cryptocurrency space in line with its commitment to create an enabling environment for innovative financial products. The Bank has observed that cryptocurrencies such as Bitcoin remain volatile. The value of cryptocurrencies is generally not linked to any conventional store of value such as fiat currency, which leads to significant price speculation. Over the past months, cryptocurrencies have gained increased interest from the public, celebrities, investors, and businesses causing prices to surge, displaying wide price fluctuations in response to any sentiments expressed by those considered to be influencers in the field. This volatility means that consumers ought to be aware that investing in or trading cryptocurrencies is risky and that those who choose to invest in this type of products should carefully consider the fact that while they stand to make huge gains, the potential to lose a lot of money is also present.
The Bank understands that there are some websites, mobile apps, firms, and individuals offering investments in cryptocurrencies or in products linked to cryptocurrencies, that promise high returns. As with all investments, the Bank encourages consumers to make sure they understand what they are investing in, and the risks associated with the investments.
The CBE cautions the public of the following concerns and risks about investments linked to cryptocurrencies:
The Central Bank further reminds the public that: