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Issuing A New Warning, CFTC Speaks On Cryptocurrencies

In a new Customer Advisory, the Commodity Futures Trading Commission (CFTC) is cautioning customers. They are asking investors to do excessive research before buying virtual coins or tokens, including “utility coins” and “consumption coins.” Titled “Use Caution When Buying Digital Coins or Tokens,” the advisory states that any promises or guarantees of future value of the virtual asset is a “red flag.”

Commenting on the new advisory, Erica Elliott Richardson, Director of the Office of Public Affairs and Office of Customer Education and Outreach, said, “This advisory is part of the CFTC’s education and outreach efforts to help educate and inform market participants, who, given the pace of technology-driven change, will increasingly come in contact with new financial products and services.”

The Office of Customer Education and Outreach works closely with LabCFTC to keep up with changes happening in CFTC-regulated markets. The office attempts to stay “ahead-of-the-curve in providing customers the information they need to protect themselves against fraud or manipulation in the marketplace,” Richardson says.

Not The First Warning

This is the fourth CFTC Customer Advisory on virtual currencies. The advisory covers a number of points relating to the virtual currency market. It says that the “very young” market doesn’t have a “widely-accepted standard” for determining coin or token value. Additionally, on the topic of Initial Coin Offerings, the advisory says that many ICO’s are frauds. They also say reports show about half of projects and companies shut down or fail one year from their ICO.

The promise of future value is a particular focus of the advisory, as it lists several factors devaluing assets. Some of the factors the CFTC mentions include: decrease in validation costs, popularity of competitors, the relationship between coin value and also the offered product/service.

According to the advisory, customers should research the “individuals and entities” affiliating with the virtual currency. From there, they should determine if the coin is a security token and registered with the SEC.

Previously, CFTC warned customers about pump-and-dump schemes. They stated that these schemes usually involve companies that offer many coin pairings. They also warned of schemes selling IRS-approved retirement accounts.

Source: https://www.cftc.gov/PressRoom/PressReleases/7756-18

 

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Jeffrey McGovern

Jeff is a cryptocurrency supporter and shares great admiration for both blockchain tech and Bitcoin. Originally from Charlotte, NC, Jeff graduated from North Carolina State University, but now resides in South Florida. With a background in English Literature, he never believed his 10 years of writing experience would be used towards creating and editing important crypto/blockchain related news.

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Jeffrey McGovern
Tags: CFTCCryptocurrenciescryptocurrencyicoICO ScamsInitial Coin Offerings
8 years ago

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