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USA regulator warns of 'fraud and manipulation' amid cryptocurrency craze

USA regulator warns of 'fraud and manipulation' amid cryptocurrency craze

Clayton also warned brokers of cryptocurrencies, saying they should ensure that their instruments do not undermine "Anti-Money Laundering" or "Know Your Customer" obligations.

A statement made yesterday by SEC Chairman Jay Clayton shows concerns about the growing ICO market as he wishes to warn potential investors of the pitfalls of getting involved with them.

"If a promoter guarantees returns, if an opportunity sounds too good to be true, or if you are pressured to act quickly, please exercise extreme caution and be aware of the risk that your investment may be lost", said Clayton in a statement after US markets closed on Monday.

"The technology on which cryptocurrencies and initial coin offerings are based may prove to be disruptive, transformative and efficiency enhancing", he said.

The SEC shut down plans by a startup food review site to raise money by selling digital tokens.

An ICO is the cryptocurrency analogy for the Initial Public Offering.

There is confusion whether bitcoins and cryptocurrencies should be regulated as a "currency" or a "commodity".

"If any person today tells you otherwise, be especially wary", Clayton added. Are the trading markets fair? Its larger rival CME Group Inc. will introduce its own Bitcoin futures next week.

This concentration makes currencies vulnerable to rapid swings should small groups of powerful investors decide to collude to manipulate markets.

So-called cryptocurrenices are increasingly in the spotlight, with Bitcoin prices soaring almost 1,600 percent this year. "I encourage Main Street investors to be open to these opportunities, but to ask good questions, demand clear answers and apply good common sense when doing so", Clayton says. At 2:44pm last week, Bitcoin was trading at $11,983. And Wall Street and Main Street are in a frenzy.

Despite the CFTC's approval of the deal, Giancarlo has repeatedly said it does not equal an endorsement of the product.

Giancarlo further noted that his agency can not effectively regulate cryptocurrencies, saying "the relatively nascent underlying cash markets and exchanges for bitcoin remain largely unregulated markets over which the CFTC has limited statutory authority".

The statement is the latest sign the SEC is in the midst of cracking down on the white-hot crypto market, but the news isn't all bad for the sector: Clayton's words also suggested the agency recognizes digital tokens as an important financial innovation. The term implies that the token for sale will be used to purchase a service (much like a subway token in the physical world), and so it's not a security that needs to be registered. Munchee, a food review App based on Blockchain, agreed to refund all investors without accepting nor denying the allegation.

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