The Canadian Securities Administrators (CSA) responded to the Wall Street launch of Bitcoin-based futures contracts with a warning about the inherent dangers.Regulators around the globe recently issues several warnings regarding digital currency investments. Canadian and American regulators accompanied the warnings with direct actions against fraudulent digital currency investments.
The CSA press release issued on December 18th, 2017 reminds dealers and investors of the “inherent risks associated with products linked to cryptocurrencies, including futures contracts.” The release states that even though contracts trade on regulated exchanges, they still carry a high level of risk. Though both CME and CBOE had to petition the U.S Commodity Futures Trading Commission (CTFC) for permission to trade bitcoin futures, and will be regulated by the CTFC as such, this does not signify a complete safety net for investors.The CSA states that the value of digital currencies currently relies on a wider marketplace that is largely unregulated. Volatility within this wider marketplace may lead to significant shifts in margin calls in the futures markets.Supply and demand of digital currency, or investment in digital currency products like ICOs, are not the only influences on digital currency value. Value is also influenced by developments or issues with the blockchain technology they rely upon. Unlike fiat currencies however, they are not influenced by the control of governments or banks.The CSA warns that any investor in digital currency futures trading should understand all of the risks involved. They remind registered dealers and advisors that they must “perform their own due diligence on these cryptocurrency-linked products before recommending them to their clients.” They instruct stakeholders and investors to consider their press release of August 24th, 2017 concerning cryptocurrency offerings.
Canadian capital market regulators are increasingly active in the digital currencies marketplace realizing both the opportunity and the risks involved. The CSA recently brought charges against fraudulent ICO PlexCoin, for instance. They also operate a CSA Regulatory Sandbox encouraging credible firms to seek assistance with ensuring their compliance with securities laws.Digital currency futures trading is likely to expand just as rapidly as the climb in digital currency trading. Traders, exchanges, and investors all seek to maximize the huge, but high risk, marketplace digital currencies present. Regulators globally need to work quickly to protect and advise investors and stakeholders in this emerging digital economy.Image credit: Wikimedia Commons
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