In many ways, it’s still the Wild West when it comes to investing in cryptocurrencies. Beware the snake oil salesman, promising high gains and fast money.
But the regulators are moving to crack down on fraudulent Initial Coin Offerings (ICOs) and cryptocurrency-related investment products. On May 22nd, the British Columbia Securities Commission (BCSC) joined forces with watchdogs in the U.S. in what is being called “Operation Cryptosweep”. The task force will be headed by the North American Securities Administrators Association (NASAA) in concert with state and provincial regulators.
The Vancouver Sun reached out to Kelly Samuels, an EKB business lawyer with expertise in financial technology (fintech), about this new development for crypto-markets.
Samuels observed that a “surge in interest around cryptocurrencies has made a relatively new market ripe for fraud.”
Regarding ICO’s, Samuels noted that: “It’s a new reality that we have this different tool companies can use to raise money, whether legitimately or fraudulently,” she said. “Regulators are rightly pointing out that investors need to be aware. Because it’s difficult to police the whole internet.”
Both the NASAA and BCSC are actively engaged in investigations and inquiries. The target of Operation Cryptosweep is primarily unregistered securities offerings. As Samuels pointed out to Vancouver Sun, investors aren’t directly subject to crackdown or punishments but regulations get murkier once investors resell their coins from a purchase that was not in compliance with B.C. law.
Similar concerns about opportunistic and deceptive practices lead to Google, Facebook, and Twitter banning cryptocurrency and Initial Coin Offering (ICO) advertising from their platforms early this year.
While there are legitimate uses for ICOs—and for fintech more generally—anyone looking to invest in this market should do their research, proceed with extreme caution, and understand the current legal landscape.
As always, we will be following these developments closely in the EKB Fintech Blog.
