Saskatchewan Markets Regulator Cautions Public Around Investing in Cryptocurrencies

November 2, 2018 @ 5:03 pm By Cali Haan

The Financial and Consumer Affairs Authority (FCAA) in the Canadian province of Saskatchewan has issued a warning to investors cautioning them around investing or trading in cryptocurrencies.

In its “Using Or Investing In Cryptocurrency? Know The Risks” release issued October 31st, the last day of Investor Education Month, the FCAA reminds the public that cryptocurrencies not considered legal tender. They are privately-issued and not produced by the Bank of Canada or other financial institution.

As such, they are “unprotected” and “unbacked,” and bear risks that do not apply to other investments says the regulator.

For example, because cryptocurrency trading is not clearly covered by existing securities laws, and because they circulate on peer-to-peer networks, investors could have a hard time obtaining recourse if something goes wrong.

Unregulated markets and exchanges also mean, “you…may be vulnerable to your investment’s value being manipulated.”

In September, John Griffin, a Professor of Finance at the University of Texas (Austen) and graduate student Amin Shams released a study claiming that large injections of a cash-simulacra cryptocurrency called Tether were being used to prop up the price of Bitcoin every time the value of Bitcoin fell.

According to the study:

“These patterns cannot be explained by investor demand proxies but are most consistent with the supply-based hypothesis where Tether is used to provide price support and manipulate cryptocurrency prices.”

Theoretically, these infusions could have been used to induce a false sense of the coin’s increasing value among the general public, something that could have lured more of them to participate.

Ultimately, the professors believe, market manipulation using Tether throughout 2018 may have contributed to the coin’s subsequent run up to $20 000 USD in December 2017.

Bitcoins now sell for around $6300 USD.

Manipulation of cryptocurrencies is a well-known fact among experienced crypts-traders and, even though exchanges have publicly denied it, manipulation is generally considered par for the course among industry insiders with.

When University of Texas report was released, Griffin, who often consults with high-level government agencies on issues of securities fraud, told CNBC, “Fraud and manipulation often leave footprints in the data and it’s nice to have the blockchain to track things.”

The FCAA has also warned consumers about the “complex,” “confusing” and “time-consuming” nature of cryptocurrency-trading, and warns that trading and withdrawing funds can involve delays and sometimes substantial fees to intermediaries.

A lack of confidence could mean losses in crypto, says the FCAA, and FCAA Acting Deputy Director of Enforcement Securities Division, Harvey White, advises caution:

“If you choose to use or invest in cryptocurrency, do your due diligence and know what you’re dealing with. Be sure to contact a professional advisor who can help you with any questions you may have. It’s important to remember that if you don’t fully understand the risks – don’t get involved.”