The Regulatory body insists potential buyers research coins and and exercise caution to avoid fraud and failure.
The Commodity Futures Trading Commission (CFTC) has released a warning to potential buyers and traders of “utility coins” or “consumption coins” and tokens, cautioning against rushed decisions and a lack of research.
The advisory alerts customers to consider the different rights and responsibilities attached to coins or tokens being sold and to understand, through investigation, the underlying factors that may affect their value.
The CFTC suggests that, because of the cryptocurrency market’s immaturity and novelty, there is no widely-accepted standard for placing value on a particular digital token or coin. Some are sold as stores of value to purchase good or services, while others offer users access to a platform or a pledge of future assurances.
“Be especially wary of promises or guarantees of future value,” the CFTC customer advisory said.
Many businesses, often startups, use funds derived from the sale of coins or tokens to support their operations.
“Commonly, a company will also require that its digital coins or tokens be redeemed to purchase its product or service,” the CFTC said. “Even future customers would need to purchase and redeem the digital tokens for access. These offerings may contend that if the product, service or network becomes more popular, then the digital tokens may increase in value due to a ‘network effect’ and could be sold to others buyers for a profit.