Cryptocurrency

Cryptocurrency

• How Cryptocurrency Works
• Investment Tips
• Investment Risks
• Starting a Crypto Business?
• Frauds involving Cryptocurrency
• Canadian Securities Administrators Videos
• Canadian Securities Administrators Infographic

 

How Cryptocurrency Works

Cryptocurrency uses a system of cryptography (encryption) to control the creation of digital money, to verify transactions and to help ensure the security of the system. To buy or sell cryptocurrencies you are assigned a “public key”, like an email address, that you can share with others and a “private key”, like a password, that you can use to acquire or send cryptocurrency from your public key. Records of cryptocurrency transactions are distributed across computer systems, called the “blockchain” which is a type of public ledger.

Cryptocurrency “miners” solve complex math problems to verify transactions ensuring they are not false and to record transactions in the blockchain. Miners receive newly-issued cryptocurrency as payment.

 

Investment Tips

It’s important to know the risks if you choose to use or invest in cryptocurrency. Do your due diligence and know what you’re dealing with. Be sure to contact a professional advisor who can help you with any questions you may have. If you don’t fully understand the risks - don’t get involved.

 

Investment Risks

1. Volatile

Cryptocurrency prices rise and fall dramatically often driven by media hype and public interest.

2. Unprotected

Cryptocurrencies are not backed by a bank or authority like Canadian currency is. Additionally, cryptocurrency may not be subject to securities regulation which means you may have little recourse in a dispute and may be vulnerable to your investment’s value being manipulated.

Cryptocurrency trading platforms and exchanges are susceptible to cybersecurity threats and hacking.

3. Complex

Cryptocurrencies are by their nature, complex and difficult to understand. It can be confusing and time-consuming to trade or withdraw cryptocurrency, often requiring several intermediaries. It is also hard to make informed decisions without financial statements and traditional assessment criteria to rely on.

4. Expensive

Certain fees are associated with trading cryptocurrency. Make sure you understand what it will cost you to trade. These costs have the potential to erode profits.

 

Starting a Crypto Business?

If you want to start a trading platform involving cryptocurrencies or issuing new cryptocurrencies called “mining” please contact the Securities Division at 306-787-5645 to discuss your project and to find out if it falls under securities legislation.

 

Frauds involving cryptocurrency

Fraudsters create fake websites and use advertisements, recommendations and private messages to convince investors that they should part with their money to achieve big returns.

Here are a few common methods that fraudsters use:

• Online ads which highlight high returns and low risk.
• Pop-up ads that promote cryptocurrency giveaways or include fake customer reviews.
• Recommendations on social media that seem to come from “a friend”.
• Private messages on social media sites such as LinkedIn and Facebook from fake profiles that look legitimate. Fraudsters can pretend to be senior executives and their profiles showcase fake investor references.

As cryptocurrency is very complicated, investors may find themselves in a situation where they are not sure about an investment opportunity, here are a few warning signs of fraudulent investments:

• Promises of high returns – Fraudsters use the promise of a higher-than normal investment returns to lure investors. If it sounds too good to be true, it is.
• Guaranteed risk-free – Fraudsters will lure you in with the promise of a zero risk investment. All  investments involve some degree of risk.
• Pressure to buy - Fraudsters use high-pressure sales tactics and may tell you there’s no time to ask for advice.
• Complex documents and technical jargon - Fraudsters want to confuse you with complex documents and technical language. They may dismiss your questions and use arguments that are inconsistent and filled with jargon.

Here are some steps investors can take to protect themselves:

• Do your research - Before making an investment, always examine the website thoroughly and do your own research. Fraudulent websites will have “too good to be true” statements and grammar mistakes. You can also search the company’s reputation online to see the reactions and reviews of other people who may have invested. 
• Verify registration - Check to see if the person or company, offering the online investment is registered and crosscheck their details with the Canadian Securities Administrators National Registration search.
• Check disciplinary history – Before investing check the history of the person or company, to find out if they have broken regulatory rules in the past. It is easy to do, using the Canadian Securities Administrators Cease Trade Orders database and the list of disciplined people and companies.
• Be suspicious of high returns - Be suspicious of anyone who promises that an investment will perform a certain way. If it sounds too good to be true, it is.
• Do not be pressured -  Do not feel pressured to make quick decisions.
• Get a second opinion – Seek professional advice before investing in a product or service.

If you have discovered a fraudulent investment opportunity, you can report the scam to the FCAA Securities Division at enforcementfcaasd@gov.sk.ca or 306-787-5936.

 

Canadian Securities Administrators Videos

For more information, watch these cryptocurrency videos from the Canadian Securities Administrators (CSA): 

What is Cryptocurrency?

What is Cryptocurrency? (Part 2)

How do you trade Cryptocurrency?

 

Canadian Securities Administrators Infographic

For more information, view this cryptocurrency infographic from the Canadian Securities Administrators (CSA):

Infographic