The top U.S. securities cop has a message for people eager to cash in on the white-hot market for digital currencies: Watch out.
So-called cryptocurrenices are increasingly in the spotlight, with Bitcoin prices soaring nearly 1,600 percent this year. Trading in Bitcoin futures contracts started this weekend on the Chicago Board of Exchange, a sign of growing acceptance on Wall Street.
A growing number of companies also are raising funds through “initial coin offerings,” or ICOs, complete with celebrity endorsements.
Yet while the uninitiated may view ICOs as similar to an initial public offering of stock by a company going public, looks can be deceiving, Securities and Exchange Commission Chairman Jay Clayton warned Monday in an unusual statement on the agency’s website.
“Investors should understand that to date no initial coin offerings have been registered with the SEC,” he said. “The SEC also has not to date approved for listing and trading any exchange-traded products (such as ETFs) holding cryptocurrencies or other assets related to cryptocurrencies.“
“If any person today tells you otherwise, be especially wary,” Clayton added.
Anyone thinking of investing in an ICO or buying digital currency should ask a number of questions, according to the SEC. These include:
- Is the product legal?
- Is it subject to regulation, including rules designed to protect investors?
- Does a given product comply with those rules?
- Is a company offering an ICO or crypto product licensed to do so?
- Are there substantial risks of theft or loss, including from hacking?
“Please also recognize that these markets span national borders and that significant trading may occur on systems and platforms outside the United States,” Clayton said. “Your invested funds may quickly travel overseas without your knowledge. As a result, risks can be amplified, including the risk that market regulators, such as the SEC, may not be able to effectively pursue bad actors or recover funds.”
Trading in bitcoin futures roared out of the gate on Sunday in their first day of trading on the CBOE, with the contract that expires in January rising as high as $18,850. The rival Chicago Mercantile Exchange is scheduled to start trading bitcoin futures on December 18.