Over the past few years, the Oklahoma Department of Securities has closely monitored the growing interest and increasing number of investments in cryptocurrency and precious metals. While these alternative investment options have gained popularity, it is crucial to be aware of their inherent risks, particularly regarding the potential for fraud.
Cryptocurrencies differ significantly from current banking, securities, and insurance products. Unlike conventional financial assets, cryptocurrencies lack a lender of last resort, have limited financial disclosures, and typically offer no insurance protection against losses stemming from market fluctuations, theft, or fraudulent schemes. Cryptocurrency investments are susceptible to fraud, as they often lack the regulatory safeguards present in traditional financial systems. However, securities regulations most likely will not come into play unless the purchase of the cryptocurrency is tied to interest bearing accounts or award programs.
When investing in precious metals, such as silver, gold, and platinum, it is essential to recognize that this type of investment is not without its own set of risks. Physical holdings of precious metals are subject to market volatility and potential losses. While gold is often seen as a "safer” investment, it is not immune to price declines, and investors should be aware of the associated trading risks. The valuation of precious metals in an investment portfolio is primarily determined by their intrinsic melt value, distinct from the worth associated with owning rare metal coins, which may possess numismatic value extending beyond the inherent metallic content of the coin. Investors should also understand that like direct investments in cryptocurrencies, direct investments in physical precious metals are not subject to securities regulation and not eligible for Securities Industry Protection Corporation (SIPC) protection.
Cryptocurrency and precious metals may offer distinct investment opportunities, but they also present significant risks. By staying informed, conducting thorough research, and approaching these investments with caution, investors can reduce their vulnerability and make well-informed decisions to help secure their financial futures. If you can’t explain the yield, you are the yield.