What it is
Cryptocurrency is digital currency. There's no bank or government involved – instead, cryptocurrency is kept in a digital wallet and transactions are recorded using blockchain technology. There are over 4,000 different types of cryptocurrency available online, including Bitcoin.
Cryptocurrency can be used to buy or sell goods or services online like any other form of currency. To access your wallet, you use a private key – a very long string of information that can’t be cracked easily.
Related technologies
Non-fungible tokens (NFTs)
NFTs are certificates of ownership for unique digital items, for example art or music, that verify who owns it using the same blockchain technology as cryptocurrency. NFTs you purchase are kept in your wallet, along with your currency.
NFTs have similar risks to cryptocurrency.
Decentralised Finance (DeFi)
Decentralised Finance (DeFi) is a new financial technology that uses crypto blockchain technology to make financial transactions without traditional institutions such as banks and other regulators. DeFi is an unregulated technology, so it also has the same kinds of risks as cryptocurrency and NFTs.
The risks
We've seen an increase in the number of scams and theft targeting cryptocurrencies. These scams can result in large financial loss.
Cryptocurrency investment scams
These scams:
- send out emails, or set up fake websites, advertising cryptocurrency investment opportunities with attractive returns
- sometimes also offer direct sales of cryptocurrencies, such as Bitcoins, Litecoins or other altcoins (a term used to describe non-Bitcoin currencies) – but then after the target has paid, the scammer doesn’t deliver the promised coins
- often use common scam techniques to trick users – for example, creating a sense of urgency or promoting fake currency.
Be aware that any offers could be a scam, especially if you're contacted out of the blue or if the offers are too good to be true.
Stolen cryptocurrencies
These attacks use a fake website to trick you into downloading malicious software. The attackers use the software to get login details or private keys to transfer cryptocurrency into their accounts.
For example:
- You click on an ad and download an app related to cryptocurrency. You try to log in into your account through the app and it fails. When you check your wallet in a different app, all your cryptocurrency has been removed.
- A user clicks a link in a phishing email which appears to be from the cryptocurrency exchange they use. When they enter their password and username for the exchange and refresh the page, they notice their wallet has been emptied.
Forgetting your wallet’s private key
If you forget your private key, you won’t be able to retrieve it anywhere. If you can’t log in to your wallet, you can’t access any of the funds in it.
Wallet storage issues
Your cryptocurrency wallet needs to be kept securely, either on your own device or with an exchange. If you prefer to use an exchange’s wallet services, look for a reputable one.
If the exchange:
- is targeted by a DDoS (denial-of-service) attack and goes down, access to your wallet will be temporarily unavailable
- closes its business and goes offline, you’ll lose your cryptocurrency.
Cryptocurrencies — Financial Markets Authority
How to protect yourself
Take these steps to keep your cryptocurrency safe.
