NASAA and the SEC warned investors about the risks of investing in cryptocurrency-linked investment products. The President of NASAA (the association of state securities regulators) warned, “Cryptocurrencies and investments tied to them are high-risk products with an unproven track record and high price volatility. Combined with a high risk of fraud, investing in cryptocurrencies is not for the faint of heart.” NASAA further highlighted the risks of cryptocurrency investments including minimal regulatory oversight, the possibility of cybersecurity breaches, lack of insurance, high volatility, and reliance on unproven companies. The SEC commended NASAA’s statement, stressing that cryptocurrencies, “lack many important characteristics of traditional currencies, including sovereign backing and responsibility, and now are being promoted more as investment opportunities than efficient mediums for exchange.”
OUR TAKE: We predicted (not very long ago) that the regulators will pursue regulation of cryptocurrency offerings. This may not be bad for this emerging industry in the long term. After all, significant regulation made mutual funds the most popular investment vehicle of the last 100 years.