As Bitcoin continues to blast past price barriers, investors are starting to pile into initial coin offerings in hopes of riding a similar boom. But the possibility of cryptocurrency fraud has become an increasing concern among regulators — including Canada’s.
“We are… quite concerned,” Ontario Securities Commission
(OSC) Chief Maureen Jensen told the Financial Post
in an interview.
Bitcoin’s surging price and demand over the past year has encouraged numerous companies to offer their own digital tokens and cryptocurrencies. In Canada, this has included issues from Impak Coin, Kik Interactive, and PlexCorps, which have been subject to regulatory actions ranging from approval
In August, the Canadian Securities Administrators (CSA) clarified that initial coin and token offerings made to Canadian investors or done by any firm operating in the country should be subject to Canada’s securities laws. But since then, regulators have tightened their focus on ICOs because of scams exploiting the mania surrounding cryptocurrencies.
“[T]here are a whole bunch of companies that are rebranding themselves as ICOs, when really they’re doing nothing but taking clients’ money,” she said.
While Jensen is in favour of the blockchain technology underpinning cryptocurrencies also noted that much of the trading occurs on unregulated exchanges — a concern that’s impeded the approval of a Bitcoin ETF
. “You don’t even know where they are,” she said.
The recent approval of Bitcoin futures in the US is also a concern for Jensen. Last week, the futures started trading on the Cboe (Chicago Board Options Exchange)
, while the Chicago Merchant Exchange — the largest exchange for futures in the US — started hosting them on Sunday.
Although the exchanges are regulated, she said, trading derivatives on cryptocurrency products piles on more risk, particularly for retail investors who are generally less sophisticated than institutions.
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