Canadian regulator says crypto trading is a form of DIY investing

Rick Steves

The Canadian Securities Administrators (CSA) has warned investors that trading in crypto assets is a high risk move that may not be suitable for many, especially retail investors, due to the extreme volatility in value and liquidity.

The financial watchdog reminded consumers that a number of unregistered crypto asset trading platforms remain accessible to Canadians, but these may lack essential safeguards that protect investors’ assets from loss, theft, or misuse.

“Crypto asset trading platforms that operate in Canada and trade securities or derivatives are required to comply with Canadian securities law requirements, including registering with securities regulators. While this regulatory oversight plays an important role in investor protection, investors should know that registration cannot eliminate all risks associated with crypto asset trading platforms”, the official statement said.

Trading crypto assets requires considerable time, skill and research

Calling it a form of do-it-yourself online investing, the CSA told investors that trading crypto assets requires considerable time, skill, and research, which could eventually be delegated to a registered investment advisor whose advice may point to other options for investing in crypto.

The CSA is the council of the securities regulators of Canada’s provinces and territories and coordinates and harmonizes regulation for the Canadian capital markets.

In particular, fraudsters continue to capitalize on market interest in crypto assets to lure investors into scams, using high-pressure sales tactics and promises of high returns with little or no risk.

CSA warned investors about misleading ads and crypto scams

The CSA has recently provided guidance to crypto asset players to clarify the rules for advertising, marketing, and social media use under securities law and IIRQC. The move aimed to help crypto trading platforms understand and comply with these requirements as they have noticed a recent increase in advertising and marketing by crypto trading platforms.

According to CSA and IIROC staff, there have been statements in crypto trading platforms’ advertising and marketing materials that could mislead investors. The use of gambling-style promotions, which may encourage excessive and risky trading by retail investors, is also of concern to the agencies.

The regulator also warned investors about the increasing number of imposter sites that closely resemble registered firms, regulators, and fake endorsements by individuals. These scams are often promoted through email, texts, websites and social networks. Fraudsters target investors hoping to get in “on the ground floor” with crypto assets and exploit their fear of missing out on the opportunity of a lifetime. Investors may be misled by the convincing sales pitch and the professional appearance of the fraudulent websites.

Investments on fraudulent websites will appear to gain value quickly through manipulated statements. Fraudsters will strongly encourage investors to deposit additional funds using the illusion of rapid gains. Some websites will let investors withdraw a portion of their money to build trust and entice victims to invest more, but any request to withdraw all assets will fail. Ultimately, fraudsters will no longer respond to communication requests from investors.

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