Investors in British Columbia are being told to exercise “extreme caution” when making a cryptocurrency-related investment, as the province’s regulatory body announces it has joined an international crackdown on fraudulent sales.
The British Columbia Securities Commission (BCSC) is joining 40 jurisdictions throughout North America in an effort dubbed “Operation Cryptosweep.”
The regulators have begun investigating things like fraudulent Initial Coin Offerings (ICO) — where a company offers its own cryptocurrency to buyers, often coming with the promise of high returns.
BCSC said it has issued letters to 12 offshore companies that advertise their ICOs in B.C., and allow for residents to make purchases. The regulator has asked the companies to cease activities and comply with B.C. law.
“Fraudsters are always looking for new ways to attract victims and many are taking advantage of the popularity of cryptocurrencies to perpetrate their schemes,” said Doug Muir, Director of Enforcement at the BCSC in a press release.
In a separate news release, the Ontario Securities Commission (OSC) also announced its has joined forces with other agencies. The OSC recently warned of five firms targeting investors in Ontario, promising high returns in a shot period of time.
Kelly Samuels, a business lawyer with an interest in crypto-markets said the surge in interest around cryptocurrencies has made a relatively new market ripe for fraud.
“It’s a new reality that we have this different tool companies can use to raise money, whether legitimately or fraudulently,” she said. “Regulators are rightly pointing out that investors need to be aware. Because it’s difficult to police the whole internet.”
Samuel also pointed out that investors aren’t directly subject to crackdown or punishments, but regulations get murkier once investors resell their coins from a purchase that was not in compliance with B.C. law.
Scams in the crypto-market are also a concern for those who are working on legitimate projects in the industry, explained Victoria Lemieux, who leads a blockchain research and education cluster at the University of B.C.
“It makes people skeptical, and creates all sorts of problems for those companies that are trying to work on legitimate projects,” she said. “We applaud the BCSC’s move and hope it will chase out the bad actors, because there is a concern that they could stifle innovation.”
There have already been efforts to fortify trust in the growing tech market. iComply is a Vancouver-based platform that helps businesses issuing ICOs to comply with regulatory regimes, while also guiding investors.
Back in March, tech giants Facebook, Google and Twitter also joined forces in banning advertisements of ICOs and cryptocurrencies on their websites.
The investigations in which B.C. and Ontario are now a part of is coordinated through the North American Securities Administrators Association (NASAA). In a statement, the group said it has already launched 70 inquiries and investigations since the start of May.