The Ontario Securities Commission has weighed into virtual currency, warning investors about its risks and “uncertain future”.
The document starts out by warning investors about the uncertainty about what virtual currency actual is: money, an investment or something else. Thus, there is little guidance on what kind of protection is available should “something go wrong”, as in the event of a failed exchange.
What is certain, however, is that an investor is taking huge risks by getting involved with it. Because it is (generally) not accepted as a legal form of payment for goods or services, its value is highly unpredictable and volatile. There are also software glitches, hackings, failed exchanges, fraud and other illegal activity.
Special mention is made on how investors can be lured into entering early for what eventually turns out to be a Ponzi scheme, something which is likely true for a large number of altcoins:
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“Fraudsters have latched onto virtual currency as a way to show they’re on the cutting edge and to entice unsuspecting investors to get in “on the ground floor,” a tried-and-true technique. Some have already set up Ponzi and other illegal schemes using virtual currency to lure investors.”
Crypto fans will view the document as overweight on the negative side. Unlike many of OSC’s counterparts, such as the various financial governing bodies in the U.S., they do not mention any of cryptocurrency’s potential benefits, even in passing or for the sake of comparison. Neither is consideration given for potential regulation and normalization as some form of security in the future.
Under a section titled “Report It”, the document warns further:
“The OSC is closely monitoring investment activity related to virtual currency and we’ll take action where violations of the Ontario Securities Act are concerned.”
While the warnings to investors are certainly in order, one can speculate as to the exact intention behind this final statement. The same document earlier expressed uncertainty over how virtual currency should be classified in terms of money or investments. If it is not legally a security, then how can its misuse violate the securities act? Perhaps the overarching goal was to reassure investors, or a hint that they’ll do so as part of some future oversight.