The North Securities Administrators Association (NASAA), which includes regulators from Mexico, Canada, and the U.S, has stated that the biggest threat to investors in 2022 is cryptocurrency investments.
Investors are hoping to get rich from cryptocurrency
NASAA explains its stance by saying that while crypto has made people rich, there are too many scammers in the market who take advantage of people wanting to invest. In addition, the volatility of the industry is another cause for concern.
According to Joseph Rotunda, the Vice-Chair of the Enforcement Section Committee at NASAA, tales of investors becoming millionaires has made many people invest in the crypto space. As a daily, there are many stories of people investing large amounts which they lose. NASAA expects to see this trend more in 2022.
Scams are common in specific sectors
Rotunda states this the riskiest product in the industry are securitized tokens, crypto depository accounts, crypto mining pools, and cryptocurrency trading programs. For this reason, investors should be more careful when dealing with them.
The regulatory body adds that investors who are the targets of scams are lured in by the promise of lucrative, safe, guaranteed returns in a short period. Moreover, NASAA has linked many threats to private offerings. These are not in the federal law registration requirements.
Furthermore, investors expressed concerns over fraud offerings associated with scams from social media, promissory notes, and financial schemes linked to retirement accounts. However, NASAA Admits that the lack of regulation on crypto has led to the rise of scams.
The crypto market experienced increased growth in 2021 and reached a market capitalization of $3 million. Bitcoin and other meme cryptocurrencies were responsible for this growth. Despite this growth, investors lost about $2.8 billion in the same year because of crypto scams.
NASAA is now asking investors to be cautious when buying unregulated, volatile, and popular crypto.
The President of NASAA, Melanie Senter Lubin, investors should learn to spot a scam. One way of doing this is by filtering out investments that guarantee no risks and high returns. It is also crucial to know who or what they are investing in. Lubin adds that the best defense for an investor is information and education.