What has happened?
The North American Securities Administrators Association (NASAA) has marked the 10th anniversary of bitcoin by releasing a video about the risks of cryptocurrency-related investments.
What does this mean?
Bitcoin may have just turned 10, but according to the securities regulator, investors need to be aware of the risks involved before "jumping in" and should not rely on "media hype" when considering investing in virtual currencies.
The second video in NASAA's 'Get in the Know' series focusses on concerns investors should consider before investing in crypto-related offering.
Some of these concerns include volatility and liquidity risks, the potential for fraud and what NASAA calls the three 'Us', namely that cryptocurrencies are "untraceable, uninsured, unregulated".
“There are new and exciting advances being made daily in the FinTech world, but investors and those interested in cryptocurrencies need to be aware of the risks involved before jumping in. Don’t rely on media hype to make your purchase and investment decisions,” said NASAA President and Vermont Financial Regulation Commissioner Michael S. Pieciak.
The video explains that cryptocurrencies or crypto-related investments exist only on the internet and their promoters may be anywhere in the world, making them hard to trace.
Unlike deposits made to a bank account, deposits into a digital wallet for cryptocurrency transactions are uninsured in case of adverse events such as fraud or insolvency.
Moreover, cryptocurrencies are traded on unregulated digital platforms that lack the protections of the regulated financial markets.
Earlier this year, NASAA launched 'Operation Cryptosweep', a co-ordinated enforcement initiative by state and provincial securities regulators, which has so far resulted in more than 200 investigations of cryptocurrency-related investment products and initial coin offerings and more than 50 enforcement actions.
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