U.S. securities regulators are warning investors about the risks of buying, using, and speculating in virtual currencies, such as bitcoins.
The U.S. Financial Industry Regulatory Authority (FINRA) Tuesday issued an investor alert to caution investors about the plethora of risks that accompany digital currencies. “While speculative trading in bitcoins carries significant risk, there is also the risk of fraud related to companies claiming to offer bitcoin payment platforms and other bitcoin-related products and services,” it says.
FINRA says that the threat of fraud is “a real danger for investors looking to make a quick profit from bitcoin”. In addition to warning about scams and the risks of speculation, the alert details many of the risks associated with buying and selling bitcoins.
“As recent events make clear, platforms that buy and sell bitcoins can be hacked, and some have failed,” it says, noting that there is also no protection such as the deposit insurance that accompanies conventional bank accounts.
“Speculators drawn to bitcoin trading should understand that bitcoin prices have fluctuated widely, and wildly, almost from the currency’s inception,” said Gerri Walsh, FINRA’s senior vice president for investor education. “Investors looking to get in on the ground floor of a bitcoin-related company should realize that fraudsters may see the latest digital currency trend as a chance to steal their money through old-fashioned fraud.”