New NASAA video helps explain cryptocurrency risks
WASHINGTON, D.C. (October 31, 2018) – The North American Securities Administrators Association (NASAA) today marked the 10th anniversary of Bitcoin and announced the release of the second in its series of “Get in the Know” videos to raise awareness of the risks of cryptocurrency-related investment products.
The new short, animated video focuses on concerns individuals should consider before investing in any crypto-related offering, including the three “U’s” (untraceable, uninsured, unregulated), volatility and liquidity risks, and the very real potential for fraud. The video is available on NASAA’s website, here.
“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.
Volatility risk is a key consideration in cryptocurrency investments. Pieciak noted that Bitcoin, for example, was valued at $6,447 on October 31, 2017 before spiking to an all-time high of $19,068 on December 17, 2017 and returning to $6,283 as of October 30, 2018. Other cryptocurrencies experienced similar volatility.
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 virtually untraceable. 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 coordinated enforcement effort by state and provincial securities regulators in the United States and Canada. To date, this ongoing initiative has resulted in more than 200 active investigations of cryptocurrency-related investment products and Initial Coin Offerings (ICOs) and more than 50 enforcement actions.
“Operation Cryptosweep has helped raise awareness among industry participants of their regulatory responsibilities to remain compliant with securities laws and, in some cases, has stopped fraudulent offerings,” Pieciak said, noting that not every ICO or cryptocurrency-related investment identified in the initiative is fraudulent. “State and provincial securities regulators have dedicated significant regulatory resources to this initiative and are aggressively protecting individuals from financial harm involving fraudulent ICOs and cryptocurrency-related investment products.”
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Bob Webster | Director of Communications