Cryptocurrency Warnings From New York Attorney General

ALBANY, NY (WROC) – After the cryptocurrency market bottomed out last month, New York Attorney General Letitia James warned New Yorkers on Thursday regarding the risks of investing in these online currencies.

Cryptocurrencies are fully digital currencies mainly used for investments and some online purchases. A relatively new invention, the very first virtual money to come out, was Bitcoin in late 2009.

Since then, there has been an explosion of thousands of different types of cryptocurrencies, with varying degrees of success and longevity.

While the crypto market is heralded by some as a stable place to invest, last month both new and established digital dollars took a huge blow, costing investors hundreds of billions of real dollars.

To help New Yorkers make informed choices, Attorney General James has compiled a list of concerns, potential problems and other dangers to consider before filling your e-wallet with e-coin.

  • Limited supervision: Importantly, there are no federally regulated exchanges for crypto, meaning trading platforms have little to no oversight. Trading platforms are located all over the world and can be accessed from anywhere in the world. There are few legal remedies available should you fall prey to scammers, or lose money through other cryptocurrency experiences.
  • Highly speculative and unpredictable value: Because virtual currencies are easy to create and distribute, their underlying asset can vary quickly from currency to currency and from day to day. Princes can swing wildly and crash without warning. Sometimes price swings are driven by market hype on various social media platforms.
  • Difficulty paying out investments: In times of crisis and volatility, you may not be able to liquidate your investments as certain platforms may halt trades or claim to be experiencing technical difficulties. There is no guarantee that you can liquidate your investments when you want to, for example when the crypto markets start to crash. In times of crisis, trading platforms may stop trading or claim to be experiencing technical difficulties, preventing you from accessing your assets.
  • High transaction costs: Some trading platforms charge high fees which can depend on the size of the trade, the type of trade and when it takes place. It may cost you more to access your money when you want it most.
  • Unstable “Stablecoins”: Despite the name, there is no guarantee that your stablecoin investment will be more stable or protected than any other virtual currency. The nature and quality of the assets that support stablecoins – if any – can vary widely.
  • Hidden Trading Fees: Due to the lack of regulation, some currencies can artificially support their value with automated trading. For example, a program can monitor when a trader makes a purchase and buy before the purchase to increase the price just before you complete the trade.
  • Conflict of interest: Many operators of virtual currency trading platforms trade on their own platforms without supervision. Their heavy investments may conflict with your interests and/or lead to investors receiving favorable treatment such as off-market private payouts.

“Over and over, investors are losing billions due to risky investments in cryptocurrency,” Attorney General James said in a press release. “Too often, cryptocurrency investments create more pain than profit for investors. I urge New Yorkers to exercise caution before putting their hard-earned money into risky cryptocurrency investments that could bring more fear than fortune.

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