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Initial Coin Offerings

Consumer Alert from Florida Office of Insurance Regulation: Cryptocurrency

Posted on January 17, 2018

Initial Coin Offerings (ICOs) and cryptocurrency-related investment products have been identified as emerging investor threats for 2018. Cryptocurrencies are a medium of exchange that are created and stored electronically in the blockchain, a distributed public database that keeps a permanent record of digital transactions. Common cryptocurrencies include Bitcoin, Ethereum and Litecoin. Unlike traditional currency, these alternatives have no physical form and typically are not backed by tangible assets. They are not insured or controlled by a central bank or other governmental authority, cannot always be exchanged for other commodities, and are subject to little or no regulation. The Florida Office of Financial Regulation encourages Floridians to be very cautious of investments involving cryptocurrency.
Some common concerns investors should consider before investing in any offering containing cryptocurrency include:
  • Cryptocurrency is subject to minimal regulatory oversight, susceptible to cybersecurity breaches or hacks, and there may be no recourse should the cryptocurrency disappear.
  • Cryptocurrency accounts are not insured by the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits up to $250,000.
  • The high volatility of cryptocurrency investments makes them unsuitable for most investors.
  • Investors in cryptocurrency are highly reliant upon unregulated companies, including some that may lack appropriate internal controls and may be more susceptible to fraud and theft than regulated financial institutions.
  • Investors will have to rely upon the strength of their own computer security systems, as well as security systems provided by third parties, to protect purchased cryptocurrencies from theft.
Check out this video to help you understand the risks associated with ICOs and cryptocurrencies.
If you feel that you may be a victim of investment fraud or to report suspicious activity, please file a complaint with the Florida Office of Financial Regulation online, flofr.com, or call (850) 487-9687. 

Filed Under: Soup Du Jour Tagged With: Bitcoin, Consumer Alert, Cryptocurrency, Ethereum, Florida Office of Insurance Regulation, Initial Coin Offerings, Litecoin

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