Washington: Despite the last week was promising for the investors in regards to returns from cryptocurrency as most of the virtual currencies witnessed an upward trend, but it seems that still there is a lot of confusion over it.
As per the news published on CCN, The United States Commodity Futures Trading Commission (CFTC) has issued another warning to consumers, advising them to exercise caution and carry out comprehensive research before investing in any cryptocurrencies, including those advertised as utility coins or consumption coins.
The alert, which came in the form of a Customer Advisory warning posted on the CFTC website on Tuesday, is the fourth warning released by the regulatory body on the subject of virtual currencies and digital assets.
Educate and Inform Market Participants
The purpose of the advisory notice, according to the CFTC, is to enlighten potential investors about existing risks and threats in the cryptocurrency market. Titled “Use Caution When Buying Digital Coins or Tokens,” it encourages customers to thoroughly research all claims, particularly those made by initial coin offering (ICO) promoters, and to find out as much information as possible about coin promoters and cryptocurrency companies before investing in them.
CFTC’s Erica Elliot 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 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.”
Avoid Red Flags
The main theme of the CFTC’s latest cryptocurrency customer advisory is that potential investors should be wary of coins or crypto schemes that over-promise or guarantee some kind of future value or return. Customers are advised to view any such advertising as an investment red flag, indicating possible intent to defraud.
The notice specifically singles out self-described “utility tokens” promising platform access or ability to purchase goods and services in the future as high risk investments, with little or no guarantee to deliver on their promises. It also mentions that if information about the issuer or promoter is not readily available, it should be considered a high risk investment.
The CFTC has put out three previous warning notices about cryptocurrencies, including a warning about pump-and-dump schemes operating through crypto exchanges, as well as a warning about coins and schemes advertising themselves as “IRS approved” in an attempt to misrepresent their price fluctuation risk.
In May, CCN reported that the CFTC issued another Customer Advisory informing retail investors about risks involved in speculative currency trading or bitcoin futures and options.