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Bitcoins created by enthusiast Mike Caldwell are seen in a photo illustration at his office in Sandy, Utah, in this file photo.JIM URQUHART/REUTERS

Hundreds of thousands of investors in Ontario are putting money into cryptocurrencies despite a lack of understanding in a new asset class that includes bitcoin, ethereum, digital tokens and initial coin offerings (ICOs).

The findings, publishing in a research study released on Thursday by the Ontario Securities Commission, found that 5 per cent or 500,000 Ontarians surveyed own cryptoassets. An additional 4 per cent have held one in the past.

In addition, results also showed an increasing number of Ontarians being approached about participating in initial coin or token offerings, exposing them to potential risks given the lack of familiarity with these types of investments.

“It’s important that investors understand the potential risks and characteristics of purchasing a cryptoasset product,” Tyler Fleming, director of the Investor Office at the OSC, said in a statement. “We want to remind Ontarians to ask questions and read disclosure documents carefully to know what they are investing in.”

While bitcoin and other digital coins are often associated with “dark web” networks and ransomware, the number of legitimate uses for digital coins is growing. Canadians can now use them to pay online for flights and hotel bookings, as well as for furniture, movies, music, games and apps, among other items.

Although digital currencies are not backed by any country’s central bank, they enable individuals to transfer value to each other and pay for goods and services without the need for a middleman – typically the banks and the mainstream financial system. One typical use would be to wire transfer money to another person.

But there can be risks associated with cryptoassets’ underlying markets, which sometimes include drug dealers and online hackers. Many of the exchanges trading these assets reside in jurisdictions outside the home country, which makes regulatory oversight difficult.

Over the past 12 months, bitcoin, digital tokens and other cryptoassets have captured significant public attention as the price of bitcoin saw accelerating values, which at times hit north of $20,000.

Among cryptoasset owners surveyed, half spent less than $1,000, with only 9 per cent spending more than $10,000. The majority of those investors own bitcoin (63 per cent) or ether (35 per cent).

The study, titled Taking Caution: Financial Consumers and the Cryptoasset Sector, found past and present cryptoasset owners cited multiple reasons for acquiring cryptoassets. The top reason given was enthusiasm for technology: 46 per cent said they acquired cryptoassets out of interest in new technologies, while 18 per cent cited blockchain technology’s potential to prevent loss and fraud.

Forty-two per cent said they acquired cryptoassets in the hope of selling them at a higher price later, while 25 per cent said they acquired cryptoassets because they wanted to make payments anonymously.Twenty-three per cent said they wanted to use cryptoassets to make payments in Canada or the United States, and 14 per cent said they wanted to use cryptoassets to make international remittances.

Very few investors cited skepticism in institutions as their main reason, with only 12 per cent acquiring cryptoassets because they have low trust in banks, and 11 per cent because of low trust in government.

One major area of concern for Ontario regulators was the finding that many Ontario investors are confused about whether these types of investments are subject to regulation.

When asked who they believe regulates ICOs, half of past and present cryptoasset owners responded either that they don’t know who regulates ICOs or that they believe ICOs are not subject to regulation.

ICOs that are registered as securities offerings are regulated by the OSC.

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