The collapse of the Terra protocol and its associated coins, LUNC and UST, as well as rhe ripple effect it had on the market, has pushed the New York Attorney General, Letitia James to issue new guidance on the risks inherent in the crypto industry.
As is customary of the legal luminary, the Attorney General said the risks inherent in the crypto industry played out last month when a number of old and new digital currencies lost the majority of their value.
While this sort of crash is not new in the financial world considering stocks are also plunging based on the impact of the broader macroeconomic events around today. To Letitia James, the plunge into the crypto ecosystem comes with an extra risk when compared to the broader stock that Americans are familiar with.
“Over and over again, investors are losing billions because of risky cryptocurrency investments,” said Attorney General James. “Even well-known virtual currencies from reputable trading platforms can still crash and investors can lose billions in the blink of an eye. Too often, cryptocurrency investments create more pain than gain for investors. I urge New Yorkers to be cautious before putting their hard-earned money in risky cryptocurrency investments that can yield more anxiety than fortune.”
Besides the risks of rug pulls, hacking, and theft amongst others, the Attorney General also highlighted the highly speculative and unpredictable value of cryptocurrencies, the difficulty in cashing out due to liquidity constraints on exchanges, high transaction costs, unstable stablecoins, limited oversight, hidden trading costs and conflicts of interest as some of the major risks associated with trading the digital currencies.
In a bid to protect investors in New York, Letitia James has brought quite a number of enforcement actions against crypto entities over the past few years with Bitfinex amongst the most publicized culprit.
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