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Securities regulators issue warning on risks with cryptocurrency products

In this Friday, Dec. 8, 2017, photo, coins are displayed next to a Bitcoin ATM in Hong Kong. THE CANADIAN PRESS/AP /Kin Cheung

In this Friday, Dec. 8, 2017, photo, coins are displayed next to a Bitcoin ATM in Hong Kong. THE CANADIAN PRESS/AP /Kin Cheung

MONTREAL — The Canadian Securities Administrators has issued a warning about risks associated with products linked to cryptocurrencies as interest in the space continues to rise.

The umbrella organization for Canada's provincial and territorial securities regulators singled out futures contracts in its warning, noting that while they may be traded on regulated exchanges, their high level of risk is not suitable for all investors.

The bulletin comes after both the CME Group and Cboe started allowing trading of Bitcoin futures, allowing investors to bet on what the currency might do going forward.

CSA chair Louis Morisset said in a release that the underlying value of the futures contracts is based on trading on largely unregulated markets, making them more susceptible to volatility and at risk of sudden and significant margin calls in the futures market.

The CSA says that as with every investment, an investor looking to participate in cryptocurrency futures trading should understand all of the risks involved, and that registered dealers need to perform their own due diligence before recommending any cryptocurrency-related products.

Interest in cryptocurrencies like Bitcoin has exploded this year as the price of the currency has approached US$20,000 recently after starting the year off at under US$1,000.

 

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