NYAG Warning To Crypto Investors: What To Pick and What To Sift

Godfrey  |  Mar 3, 2021

The Office of the New York Attorney General (NYAG), recently released a memo which is tagged “Investor Alert: Virtual Currency Risks,” with the primary focus of letting Americans know how risky the cryptocurrency ecosystem is, and how to stay safe.

NYAG, by a sense of duty, is doing what is right for the masses, those it is directly obligated to protect. The memo noted that “Virtual or ‘crypto’ currencies are subject to speculative bubbles that produce wild price swings, making them among the most high-risk investments in the market. That is true even for ‘legitimate’ virtual assets purchased from more established financial institutions.”

Since the blockchain and digital currency niche came to the limelight as early as 2009, authorities around the world have struggled to create a breathing space around the new and growing technology. The cold feet these regulators have had are understandable, as this space is primarily built with cryptographic technology that masks in part, the identity of actors in the space. This serves as the perfect glue for bad actors.

The blockchain and crypto ecosystem has, however, adjusted to the demands of regulators around the world, with service providers in the space integrating anti-money laundering provisions to help curtail financial vices. This show of fate is in part not enough for authorities who believe cryptocurrencies are out to upturn the financial sanity the world took centuries to build.

The NYAG Memo and Core Positioning About Cryptocurrencies

The NYAG office revealed the flaws of the cryptocurrency ecosystem including the high unpredictability of the assets that make up the space, limited protection offered to investors, increased risk of market manipulation, conflict of interest, and difficulty to cash out investments. 

As a body backed by law to pursue the interest of shortchanged individuals, NYAG must have been a party to different lawsuits featuring crypto entities, and so must have drawn these conclusions about the cryptocurrency ecosystem as a whole.

While NYAG attributed these factors to the reason for the observable volatilities in the crypto-space, the body also highlighted the use of the elements of these price spikes by criminals to defraud innocent investors.

“Whenever prices of an asset spike, which has been the case over the last several months for some virtual currencies, there is an increased risk that criminals will take advantage of a speculative mania to commit fraud,” NYAG noted in the memo.

How True is NYAG’s Perception About The Entire Crypto space

It is foolhardy to discount the observations of the New York Attorney General’s office in a bid to promote the crypto-space. Risks abound here, and true investors in the space understand the risks but generalizing the entire crypto-space as dangerous with caution to investors to avoid investing may be overboard.

The risks, NYAG noted, the crypto-space pose to investors is almost also prevalent in the world of traditional finance as the entities therein are also always targeted by cyber-criminals. The assertion that investors are unable to cash out their investments may be true for fraudulent schemes, as the crypto ecosystem has tons of legitimate product offerings that do not tie investor’s funds unnecessarily.

Investors are encouraged to always do their own research to understand the space, in order to be able to fish out the bad projects with tendencies to drain them of their funds. They should, however, not act with the thoughts that there is no good thing that can be benefitted from the space, even though a differing position is coming from a government-backed body.

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