“Court Gavel” (Public Domain) by bestlawdir
If the Bitcoin boom of 2017 taught investors anything, it’s that not everything that glitters is worth buying. As prices surged and the industry swelled, every crypto released saw its value skyrocket and everyone was able to make hay while the sun was shining. However, as the market corrected itself and prices fell in line with reality, cracks started to appear. As well as the coins losing value, trading platforms came under fire. Cryptocurrencies in Japan saw multi-million-dollar losses, forcing financial regulators to consider the status of tokens and what they really are. Beyond that, initial coin offerings (ICOs) also started to show their weaknesses. According to research from the Statis Group, over 80% of them were labelled as scams.
NZ Regulators Tackle False Expectations
“Graph With Stacks Of Coins” (CC BY-SA 2.0) by kenteegardin
Given the problems crypto companies and investors have had in recent months, regulators in other areas have been forced to take a tougher line on any potentially damaging practices. For the Financial Markets Authority (FMA) of New Zealand, this has meant being more proactive with regards to public information. Moving into November 2018, the FMA added three companies to its blacklist. Reviewing the operating practices of Russ Horn (Forex Equinox), Zend Trade and Cryptogain, the FMA warned investors that the websites made false claims about the nature of forex trading.
With online trading now popular around the world, some sites have been too liberal with what’s possible. Indeed, by making claims such as “make $1,000 per day easily and quickly without stress,” sites such as Forex Equinox have given novices false expectations. Indeed, when you compare this type of language with what you’ll see on a properly regulated trading site, the contrast is marked. For example, when you scroll to the bottom of the Saxo Capital Markets’ homepage, you’ll see a disclaimer about the services they offer. As mandated by the UK’s Financial Conduct Authority, the site has to make it clear that people using its 182 forex trading options can make money as well as lose it. “The value of your investments can go down as well as up. Losses can exceed deposits on margin products,” reads the legal disclaimer.
Evolving to Ensure Longevity
“Analyzing Stock Market” (CC BY-SA 2.0) by ota_photos
In addition to the above, Saxo Capital Markets also offers a FAQ that aims to clear up any mystery surrounding the investment process. Doing this is not only a legal requirement but an expectation-management exercise. When everyone was investing in cryptocurrencies, people assumed they couldn’t fail. In reality, people did fail and that’s something regulators in New Zealand are now aiming to avoid. Although losses are a natural part of trading forex or any other assets, inexperienced investors don’t often take into account that fact.
By blacklisting more sites and making the information public, the FMA is aiming to educate more people and, in turn, avoid the issues the crypto industry is currently experiencing. The advent of online trading has revolutionised the industry and given more people the opportunity to speculate on a variety of financial markets. However, just as other fledgeling industries have been forced to adapt in order to survive, trading sites are having to do the same in New Zealand and beyond.
