Sask. government warning public about the risks of using cryptocurrency
All part of Investor Education Month, the Financial and Consumer Affairs Authority (FCAA) is warning Saskatchewan residents on the potential risks of trading and investing in cryptocurrency.
They are reminding people that cryptocurrency is digital money that it is not legal tender and is not issued by the Bank of Canada and no financial institution is involved in transactions.
Cryptocurrency is sent from someone’s computer to another computer through a peer-to-peer database network.
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The FCAA say Bitcoin is the most popular types of cryptocurrency – others include Ethereum, Dash, Ripple and Litecoin.
“If you choose to use or invest in cryptocurrency, do your due diligence and know what you’re dealing with,” FCAA Acting Deputy Director of Enforcement Securities Division Harvey White said.
“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.”
The FCAA states these as the risks when investing with cryptocurrency:
1. Volatile cryptocurrency prices rise and fall dramatically often driven by media hype and public interest.
2. Unprotected cryptocurrencies are not backed by a bank or authority like Canadian currency is. Additionally, cryptocurrency may not be subject to securities regulation, which means you may have little recourse in a dispute and may be vulnerable to your investment’s value being manipulated. Cryptocurrency trading platforms and exchanges are susceptible to cybersecurity threats and hacking.
3. Complex cryptocurrencies are by their nature, complex and difficult to understand. It can be confusing and time-consuming to trade or withdraw cryptocurrency, often requiring several intermediaries. It is also hard to make informed decisions without financial statements and traditional assessment criteria to rely on.
4. Expensive certain fees are associated with trading cryptocurrency. Make sure you understand what it will cost you to trade. These costs have the potential to erode profits.