Authorities in Alaska and Idaho provided advice on the risk factors associated with investments in cryptocurrency.
On January 4, 2018, finance officials in both Alaska and Idaho issued statements that warn of risks associated with cryptocurrency-based investments.
The statements came in concert with a similar message from the North American Securities Administrators Association (NASAA), which was endorsed by the SEC. The director of Alaska’s Division of Banking and Securities, Ms. Kevin Anselm, hopes that Alaskan investors will be inquisitive as they approach cryptocurrency. “What exactly do I get for my investments?” she asked. “Will it be tangible? Is it kept in some sort of a blockchain? And if it’s in a blockchain, what is a blockchain and how does that operate with your investments?”
Anselm pointed out the risks that consumers, lacking federal insurance, might face in the event of a security failure that causes their cryptocurrency to disappear. “People need to understand what it is they’re really investing in and what they can expect – and what the offerer is offering – as a return.”
An uptick in the popularity of cryptocurrencies that are seeing all-time highs may be fueling both investor interest and the efforts of solicitors riding the trend. “We’re seeing a number of people contacted by sellers of virtual currencies or sellers that want people to get in on initial coin offerings, including virtual currencies,” said Anselm.
On the same day, in Idaho, an issuance from the state‘s Department of Finance (DoF) reads along the same lines. Department director Gavin Gee said, “Investors should go beyond the headlines and hype to understand the risks associated with investments in cryptocurrencies, as well as cryptocurrency futures contracts and other financial products where these virtual currencies are linked in some way to the underlying investment.”
The document from the DoF lists similar concerns as those voiced by Anselm in Alaska, namely surrounding regulatory oversight, high volatility, a lack of Federal Deposit Insurance Corporation (FDIC) backing, security, and licensing.
In addition, the DoF’s document makes note that cryptocurrencies like Ether, bitcoin, and Litecoin lack the characteristics of traditional fiat currencies. While wary about cryptocurrencies, the state seems to be a bit more supportive of the blockchain technology that backs them; the municipal government of Boise is in the midst of exploring public-sector applications for blockchain systems.
Both states’ releases list the concerns and red flags that were outlined by NASAA.
While state agencies continue to struggle with context when regulating cryptocurrencies, the running dialogue from these institutions seems to be clear: tread with caution.
Jeremy Nation is a writer living in Los Angeles with interests in technology, human rights, and cuisine. He is a full time staff writer for ETHNews and holds value in Ether.
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