You may have heard of investors who’ve made a lot of money in record time thanks to cryptocurrencies such as Bitcoin, Tether, or Ethereum. You may even be wondering whether you should invest in these currencies as well. But what do you need to know before investing? And above all, how can you protect yourself against fraud?
From a legal point of view, cryptocurrency is not “legal tender” in Canada. Essentially, this means that a merchant doesn’t have to accept cryptocurrency as payment. Rather, cryptocurrency is the equivalent of a digital good or object that you can buy, own, trade and sell.
While some businesses or websites may accept cryptocurrency as payment, it’s more often than not purchased and held as speculative investment. People who buy them don’t usually do so because they’re secure investments or because they’re looking for the ease of paying for their purchases. Rather, investors hope that the value of the investment will increase over time.
Things to know before investing
Don’t believe anyone who tells you that cryptocurrencies are a surefire way of getting a high return on investment. The market varies a lot, and quickly! Making gains is a possibility, but suffering sudden and extremely large losses is a risk to consider.
Cryptocurrency investment is also a field plagued by numerous frauds. Training courses, seminars or workshops on cryptocurrency, for example, are frequently used by fraudsters to establish initial contact with you. Once they’ve gained your trust, they’ll then go on to take large sums of money from you.
You should also be wary of offers to transfer money from one platform to another. This is one of the techniques used to steal your investments. Some people would have you believe that their platform is secure, when in fact it is not. Fraudsters then have the opportunity to disappear with your cryptocurrency investments, without you having any chance of tracing them.
How to avoid fraud
When a website or app offers investment opportunities to Quebecers, it must be registered with the Autorité des marchés financiers du Québec (Quebec securities commission or AMF). This applies whether or not the offices of the website or app are located in Quebec.
Checking registration is simple: just visit the website of the AMF or call 1 877 525-0337.
The AMF is a government agency whose mission is to protect small investors. Since people and organizations registered with the AMF, such as websites or apps, are monitored, the risk of fraud is much smaller. Whether you invest in cryptocurrencies or in the stock market, make sure to do so via registered individuals or organizations!
For more information on this topic, read the Autorité des marchés financiers’ article on cryptoasset fraud.