Consumer Alert: Investors reminded to approach cryptocurrency with caution

TOPEKA, KS – With cryptocurrencies continuing to attract headlines, the Office of the Kansas Securities Commissioner reminds Kansas investors to be cautious about investments involving cryptocurrencies.

“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,” said John Wine, Securities Commissioner.

Cryptocurrencies are a medium of exchange created and stored electronically in the blockchain, a distributed public database that keeps a permanent record of digital transactions. Current common cryptocurrencies include Bitcoin, Ethereum and Litecoin.

Unlike traditional currency, these alternatives have no physical form and typically are not backed by tangible assets. They are not insured or controlled by a central bank or other governmental authority, cannot always be exchanged for other commodities, and are subject to little or no regulation.

A survey of state and provincial securities regulators by the North American Securities Administrators Association (NASAA), of which the Office of the Kansas Securities Commissioner is a member, shows 94 percent believe there is a “high risk of fraud” involving cryptocurrencies. Regulators also were unanimous that more regulation is needed for cryptocurrency to provide greater investor protection. More