Cryptocurrencies, such as Bitcoin, Ether and Litecoin, are digital mediums of exchange that use cryptography for security. Different cryptocurrencies can be used in different ways. Some may be used as a way to purchase goods or conduct business online.
Cryptocurrencies are not issued or backed by a central bank or monetary authority. Some cryptocurrencies, particularly those offered in initial coin offerings (ICOs) and initial token offerings (ITOs), may be subject to securities regulation in Ontario.
Most cryptocurrencies are bought and sold through online trading platforms, commonly called cryptocurrency “exchanges”. Users can buy, sell or exchange cryptocurrencies for other cryptocurrencies or conventional money, like dollars, often for a fee.
Cryptocurrency trading platforms operate around the world. These platforms may be susceptible to fraud, market manipulation and cyberattacks. Some users have reported difficulties converting cryptocurrencies to conventional money as some platforms may not have enough cash on hand to meet withdrawal requests.
Before you consider buying cryptocurrencies, understand the risks, including:
1) High volatility – cryptocurrencies are prone to large swings in market value – you could stand to lose some or all of your money.
2) Lack of oversight – without regulation and oversight, you may be left with few options if something goes wrong. ICOs and ITOs may be subject to securities regulation. When in doubt, contact the Ontario Securities Commission at 1-877-785-1555.
3) Risk of fraud – some fraudsters have tried to capitalize on cryptocurrency interest by creating new scams, or by rebranding existing scams like binary options.
You can learn more about cryptocurrency and how to protect your money by visiting GetSmarterAboutMoney.ca/Crypto, the Ontario Securities Commission’s award-winning investor education website. You’ll also find unbiased information about investing and resources to help you make informed investment decisions.