New York Attorney General Letitia James alerts the New Yorkers of the risks of investing in cryptocurrency markets ranging from wild price swings to potential losses from scams, thefts and hacks.
After the market recorded a devastating bearish run last month which caused investors to lose hundreds of billions, she wrote a guidance note on Thursday, June 2, to remind the people of the risks of investing in virtual currency.
She established that Cryptocurrencies are subject to extreme and unpredictably highly volatile price swings encountered last month when the price of multiple virtual currencies plunged deep. From the newest coins to the well-established coin, their prices plunged deep and wiped away hundreds of billions in investments.
Cryptocurrency Investment Risks
Not only the volatile market, but she also noted that even the legitimate and ”stable” virtual assets are subject to speculative bubbles and security issues. To protect New Yorkers from this extremely volatile, poorly regulated, and insecure market, Attorney General James offers to guide the New Yorkers on various risks associated with this new technology, cryptocurrencies.
New York is the center of traditional finance in the US and an important market for many crypto firms. The guidance proposed by the Attorney General comes as the Stablecoin TerraUSD collapsed in recent weeks, wiping billions of dollars and plunging investors into losses. The fall of TerraUSD brought the dip of the crypto giant BTC to over 50% of its all-time high in November.
In her guidance note published on Thursday, she said, “Over and over again, investors are losing billions because of risky cryptocurrency investments,” Ms. James said. “Too often, cryptocurrency investments create more pain than gain for investors. I urge New Yorkers to be cautious before putting their hard-earned money in risky cryptocurrency investments that can yield more anxiety than fortune.”
She continued by listing a few risks associated with the crypto market, including the unpredictable underlying value of virtual currencies, higher transaction costs on trading platforms for transfers and withdrawals, and hidden trading costs. The guidance also noted that there are often conflicts of interest in the crypto market because many operators of crypto-trading platforms are invested in virtual currencies and trade on their platforms without federal oversight leading to no federally regulated exchanges.
Thursday’s guidance note continues Attorney General’s James efforts to regulate the cryptocurrency industry and protect New York investors. James has issued alerts before, including a taxpayer notice to virtual currency investors and their tax advisors to declare and pay taxes on their virtual investments accurately. Also, in October 2021, Attorney General James directed unregistered crypto lending platforms to cease operations for not fulfilling their legal obligations. In March 2021, Attorney General James warned New Yorkers of the risks of cryptocurrency investments and reminded investment platforms of their legal obligations.
Additionally, in 2018, the Office of the Attorney General (OAG) released its “Virtual Markets Integrity Initiative” report, a more detailed overview of the virtual currency markets in New York and worldwide. The report gives basic but important information about how virtual currencies to trade and the risks investors face when buying and selling, even on “legitimate” trading platforms.
