CFTC Warns on Crypto Again, Issues Consumer Advisory When Buying Tokens

The Commodity Futures Trading Commission (CFTC) has issued their fourth warning on consumers purchasing cryptocurrency. The “Customer Advisory told investors to use caution and to extensive research prior to purchasing virtual coins or tokens – including “self described utility coins or consumption coins.”

Erica Elliott Richardson, Director of the Office of Public Affairs and Office of Customer Education and Outreach, said the advisory is part of the CFTC’s ongoing education and outreach program designed to inform individuals about new financial products and services.

“The CFTC’s Office of Customer Education and Outreach closely coordinates with LabCFTC in order to keep pace with developments in the markets the CFTC regulates, and we look forward to staying ahead-of-the-curve in providing customers the information they need to protect themselves against fraud or manipulation in the marketplace.”

The CFTC said that guarantees of future value should be viewed as a “red flag.”  As the market is relatively new, there remains no accepted standard in valuing a digital coin or token. The CFTC stated:

“This is an important reason to beware of coins or tokens sold today with the claim that they can buy goods, services, or platform access in the future. Also, businesses that are still in the proposal stage may use funds from coin sales to start or grow their ventures.  The advisory provides important factors for customers to weigh that could impact the current or future value of a coin or token.”

CFTC Customer Advisories on Virtual Currencies:

Beware Virtual Currency Pump-and-Dump Schemes highlights virtual currency pump-and-dump schemes that occur in the largely unregulated cash market for virtual currencies and digital tokens, and typically on platforms that offer a wide array of coin pairings for traders to buy and sell.

Beware of “IRS Approved” Virtual Currency IRAs is designed to encourage investors to be cautious of sales pitches touting “IRS approved” or “IRA approved” virtual currency retirement accounts. Virtual currency prices sometimes experience wild price swings. This volatility is not reduced or limited just because the virtual currencies are held in an IRA.

Customer Advisory: Understanding the Risks of Virtual Currency Trading informs the public of possible risks associated with investing or speculating in virtual currencies or recently launched Bitcoin futures and options.
The CFTC has also issued several customer protection Fraud Advisories that provide the warning signs of fraud covering Commodity Pools, Precious Metals, Foreign Currency, and Binary Options, among other areas.

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