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.”
“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.”