Inflation is high, so the money in your bank account is steadily decreasing. But a friend of yours knows someone who has made tons of money from crypto. And in a YouTube ad, an influencer says he can live a luxurious life as a ‘digital nomad’ because he makes huge profits day trading the stock market. So maybe you also want to invest in cryptocurrencies or stocks. Then you need to know something about risks, spread of opportunities and legal protection, because they differ quite a bit on the exchange and in Bitcoin. You can read about that in this article.
Radar asks questions about stocks and cryptos to asset manager and stock commentator Jim Tehupuring and to Iris Newman, who as a ‘fin influencer’ shares tips about finances online.
Long-term versus short-term returns
Tehupuring believes that investing in cryptos falls under speculation: making money quickly from a price rise. ‘If you invest in shares, you are to invest in companies you have faith in and long-term growth,” he says. ‘If you want to make money very quickly, it may take a while, but in the end it often ends in tears.’ Newman partially agrees with the caveat that it is also possible to speculate on shares.
You are not legally protected when investing in crypto
It is good to know that there is no oversight of crypto companies. For example, there are no laws at all for crypto advertising as there are for other financial products. There is also no control over who can create a crypto coin – Radar demonstrated by creating its own ‘token’.
More importantly, crypto trading platforms are not monitored by a regulator while the traditional exchange is. Supervisory authorities of the Netherlands Authority for the Financial Markets and De Nederlandsche Bank (DNB) deal with banks and stockbrokers, among others, not cryptobrokers.
Registration of crypto brokers
Some crypto brokers are registered at DNB. This does not mean that DNB supervises them, it just means that these companies have provided a list of basic data: they must explain to DNB who runs the company, how the company is managed and what the business model is. Many international crypto brokers do not even comply with this registration. For example, users of the popular trading platform Binance recently lost the ability to deposit money with iDeal or with SEPA transfers because the company had no registration (Binance has now submitted a registration request to the DNB).
Box 3: your shares and cryptocurrencies with the tax return
You are required to list all your assets with your tax return, in the so-called ‘Box 3’. Both stocks and cryptocurrencies fall under that category. However, stockbrokers provide you with a standard financial year summary that you can use for your tax return. Often your stocks and other traditional investment products are already filled out with your tax return because the tax authorities have access to your portfolio. The tax authorities cannot (yet) see your crypto assets, and crypto brokers often do not send you an annual statement. For example, Tehupuring says his crypto broker sent him a message saying: you need to know what your cryptos are worth on January 1st, and we’re not doing a summary for you, so take a screenshot of your crypto wallet on January 1st.
Register as a beginner?
For small investors, ‘fund investment’ is a good option, says Tehupuring. You don’t buy individual shares (which can be very expensive), but you put money into a sort of basket of shares through a bank or other financial institution. That way, you can still participate in the stock market for small amounts, for example 50 euros per month. Newman advises beginners not to invest in cryptocurrencies. “I would start with ordinary stock investing,” she says, also pointing to fund investing as a good way to get in.