Crypto assets pose a variety of risks to investors, warns the British Columbia Securities Commission (BCSC) in a new guide on the sector.
The BCSC guide aims to demystify the emerging sector for investors, while also spelling out some of the risks they pose.
“Generally, there are liquidity, security and volatility risks associated with crypto assets, making it difficult for people to find a marketplace where they can buy and sell their holdings easily at a consistent price,” it noted.
The online nature of crypto-assets can also represent an added investor risk, the BCSC said.
“Companies and individuals may remain anonymous, easily mask their identity, or reside outside of the jurisdiction where you purchased the asset. This makes it difficult for you to pursue a legal remedy if you have an issue with the offering or those behind it,” it added.
Additionally, the fact that crypto-assets and crypto trading platforms generally aren’t regulated means that investor protections — such as safekeeping requirements, disclosure obligations and measures to guard against abusive trading — don’t apply to crypto trading.
Earlier this year, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) launched a consultation on regulating crypto trading platforms.
To that end, IIROC is seeking volunteers for its Crypto-Asset Working Group (CWG), which provides the self-regulatory organization with advice on proposed regulation (rules and guidance) for crypto assets.
The group will review crypto-related regulatory proposals to ensure that they address “market integrity and investor protection concerns” and are practical and cost-efficient, the self-regulatory organization said in a notice.
IIROC’s CWG is composed of representatives with trading expertise, investor representatives, independent members and legal/compliance experts.
Applications to join the group are due by June 21.