OLYMPIA – The Washington State Department of Financial Institutions (DFI) reminds Washington consumers that investing in cryptocurrencies or cryptocurrency applications and platforms may be subject to extreme market volatility resulting in significant losses.
There have been several recent developments in the cryptocurrency space consumers need to be aware of. In times of extreme cryptocurrency market volatility, consumers investing in cryptocurrency or consumers placing funds on a cryptocurrency platform may have difficulty liquidating to cash. Further, during times of crisis, platforms may halt trading, which may prevent consumers from accessing their funds.
“Market volatility has led to company instability, huge investor losses, and significant regulatory actions,” DFI Director Charlie Clark said. “As with any investment, there are those whose cryptocurrency investments do well. There are also many whose do not, and others left with empty wallets when a company goes bust. Now, more than ever before, it is critical investors do their research before investing and understand the risks associated with the investments they choose.”
Additionally, the recent bankruptcies of two major companies have revealed that consumers holding accounts at these types of companies may be considered unsecured creditors. Investors also should be aware that funds held on cryptocurrency trading platforms are likely not insured by the FDIC. Recently, the FDIC issued a Fact Sheet clarifying when an account is considered FDIC insured.
Tips for Investors:
- Understand what you’re investing in:
- Research the company prior to investing – know their performance history.
- Verify whether a company is licensed and regulated in the State of Washington.
- Check the terms and conditions of the account agreement to make sure you understand your rights under the terms of the agreement.
- Consumers should understand this may mean scrolling through many pages of “fine print” and/or requesting additional information directly from the company to fully understand the risks.
- Never invest more than you can afford to lose and maintain a diversified investment portfolio to help weather the market ups and downs.
- Understand there are risks:
- Contact the company immediately if you have concerns.
- If you feel you’ve been defrauded, file a complaint.