The financial regulator of the Canadian province of New Brunswick, the Financial and Consumer Services Commission, has issued a warning to local residents about investing in cryptocurrencies and initial coin offerings (ICOs).
“With initial coin offerings, there are no controls on how the money invested in them will be used,” said Jake van der Laan, the commission’s director of enforcement and chief information officer. “The investor receives tokens in exchange for their investment, but those tokens may only have value inside the proposed project. It is like investing in the construction of a casino in exchange for poker chips. But those poker chips are only worth something if the casino is built.”
The commission advises people to avoid investing in a company if they do not fully understand the business or how their investment will make money.
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“Cryptocurrencies and initial coin offerings are extremely risky investments and are likely to become the next wave of internet fraud,” added van der Laan. “Fraudsters often try to use the lure of new and emerging technologies to convince potential victims to invest money in their scams.”
Echoing previous regulatory warnings around the world, the FCSC says that cryptocurrencies have no inherent or underlying value, and their price is being pushed up by speculators. They added that the instruments are not endorsed or regulated by a central authority and, because of the anonymous nature of their transactions, are vulnerable to money laundering.
Another concern expressed by the provincial body is that “once an investor’s money leaves Canada, it is hard, if not impossible, to get it back.”