New York Attorney General Letitia James in February.
Photo:
MIKE SEGAR/REUTERS
New York’s attorney general said the cryptocurrency market contains myriad risks for investors, from wild price swings to potential losses from hacks or fraud.
Letitia James
reminded New Yorkers of the risks of investing in virtual currency in a guidance note published Thursday. She said investors have lost hundreds of billions of dollars in crypto investments in the market turmoil last month and said even legitimate virtual currency assets are subject to speculative bubbles and security issues. She added that the market also lacks significant oversight as there are no federally regulated exchanges.
The guidance comes as the stablecoin TerraUSD collapsed in recent weeks, saddling investors with billions of dollars in losses. The price of bitcoin has also fallen more than 50% since its November record high.
New York, the center for traditional finance in the U.S., is also an important market for many crypto firms.
“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.”
A few risks associated with the crypto market include 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 own platforms without oversight.
Thursday’s guidance is the latest push by the New York attorney general’s office to regulate the crypto market. The office has issued alerts before, including one in March that urged “extreme caution” in investing in crypto, and reminded industry professionals, such as brokers and dealers, of their legal obligations to register with the office of the attorney general when they do business with virtual currencies.
Write to Mengqi Sun at [email protected]
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