CFTC Issues New Warning on Utility Tokens & Other Cryptocurrencies

The United States Commodity Futures Trading Commission (CFTC) has issued another warning to consumers, advising them to exercise caution and carry out comprehensive research before investing in any cryptocurrencies, including those advertised as utility coins or consumption coins.

The alert, which came in the form of a Customer Advisory warning posted on the CFTC website on Tuesday, is the fourth warning released by the regulatory body on the subject of virtual currencies and digital assets.

“Educate and Inform Market Participants”

The purpose of the advisory notice, according to the CFTC, is to enlighten potential investors about existing risks and threats in the cryptocurrency market. Titled “Use Caution When Buying Digital Coins or Tokens,” it encourages customers to thoroughly research all claims, particularly those made by initial coin offering (ICO) promoters, and to find out as much information as possible about coin promoters and cryptocurrency companies before investing in them.

CFTC’s Erica Elliot Richardson, Director of the Office of Public Affairs and Office of Customer Education and Outreach said:

“This advisory is part of the CFTC’s education and outreach efforts to help educate and inform market participants, who, given the pace of technology-driven change, will increasingly come in contact with new financial products and services. The CFTC’s Office of Customer Education and Outreach closely coordinates with LabCFTC in order to keep pace with developments in the markets the CFTC regulates, and we look forward to staying ahead-of-the-curve in providing customers the information they need to protect themselves against fraud or manipulation in the marketplace.”

“Avoid Red Flags”

CFTC Chairman J. Christopher Giancarlo | Source: YouTube

The main theme of the CFTC’s latest cryptocurrency customer advisory is that potential investors should be wary of coins or crypto schemes that over-promise or guarantee some kind of future value or return. Customers are advised to view any such advertising as an investment red flag, indicating possible intent to defraud.

The notice specifically singles out self-described “utility tokens” promising platform access or ability to purchase goods and services in the future as high risk investments, with little or no guarantee to deliver on their promises. It also mentions that if information about the issuer or promoter is not readily available, it should be considered a high risk investment.

The CFTC has put out three previous warning notices about cryptocurrencies, including a warning about pump-and-dump schemes operating through crypto exchanges, as well as a warning about coins and schemes advertising themselves as “IRS approved” in an attempt to misrepresent their price fluctuation risk.

In May, reported that the CFTC issued another Customer Advisory informing retail investors about risks involved in speculative currency trading or bitcoin futures and options.

Images from Shutterstock

Last modified: March 4, 2021 4:04 PM

David Hundeyin

I am a busy Nigerian writer, journalist and writer with an interest in tech and finance. When I'm not contributing to CCN and traveling around Africa, you can catch me contributing to CNN Africa, or in the writers room at 'The Other News', Nigeria's weekly answer to 'The Daily Show' with nearly 2 million viewers. My work on 'The Other News' was featured in the New Yorker Magazine, and that was then cited in the Washington Post so I'm not sure that counts as a feature but I'll definitely mention it too! I have been nominated by the US State Department to take part in the 2019 Edward R. Murrow Program for journalists under the International Visitors Leadership Program. I also like hamsters. You can reach me on Twitter at _David_Hundeyin