Investors should always be wary of ‘too good to be true’ sounding investment opportunities, but new opportunities in cryptocurrency can be particularly difficult to evaluate for risks. The Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) and the Wisconsin Department of Financial Institutions (DFI) caution consumers to watch out for scammers and thieves when they invest in cryptocurrency.
Cryptocurrency is a computer-based digital currency designed to work as a monetary system wherein individual coin ownership records are stored in a ledger existing in a form of a computerized database. This database, or blockchain, uses strong cryptography to secure transaction records, control the creation of additional coins, and verify the transfer of coin ownership. Examples of cryptocurrencies include Bitcoin, Ethereum, Dogecoin, Litecoin, Binance Coin XRP, and Tron. These cryptocurrencies are often available through a crypto exchange such as CoinBase or Binance.
“Cryptocurrency investments may sound like exciting opportunities, but they can also pose significant risks. Consumers should use caution and do their research if considering investing in cryptocurrency,” suggests DATCP Secretary Randy Romanski. “Investors should also take care to safeguard their cryptocurrency keys, seed phrases, and exchange account information to prevent theft.”
“Cryptocurrencies do not fall neatly into the existing state and federal regulatory framework yet, so it may be easier for promoters of these products to scam you,” said DFI Secretary Kathy Blumenfeld. “If you choose to invest in a cryptocurrency or related product, be prepared that some or all of the invested funds could be lost. Cryptocurrency investments are not recommended for retirement investments or with any money you cannot afford to lose. Before making any financial decisions, do your homework, ask questions, and contact DFI’s Division of Securities with any questions about the product or the person selling it.”
Some concerns about cryptocurrency include:
Cryptocurrency Deposit Accounts
Unlike traditional savings accounts, interest-bearing crypto-asset and cryptocurrency accounts come with big risks. A growing number of companies are offering “deposit” accounts that operate with a seemingly simple promise to pay high rates of interest on deposits of cryptocurrencies. However, investors should know cryptocurrency transfers may be untraceable and irreversible. When they go to withdraw the invested funds, they risk discovering they have been scammed. Neither the FDIC nor any other governmental agency insures deposits in cryptocurrency interest-bearing accounts.
Beware of SIM Swapping
When a hacker has stolen personal information, such as your name, email, account information, and phone number they can initiate a SIM Swap, and end up wiping your cryptocurrency accounts clean. This starts when…