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Five years into the Bitcoin phenomenon and the US Securities and Exchange Commission has given its verdict on the digital currency: No dice. The SEC issued a warning on Wednesday to potential bitcoin investors.
Five years into the Bitcoin phenomenon and the US Securities and Exchange Commission (SEC) has given its verdict on the digital currency: No dice. The SEC, the top regulator for markets in the US, issued a warning on Wednesday to potential bitcoin investors who “can be easily enticed with the promise of high returns in a new investment space and also may be less skeptical when assessing something novel, new and cutting-edge.”
This is not the first statement by the SEC warning potential investors of the threats digital currency poses. Last year they issued a statement of bitcoin in the context of a Ponzi scheme. The most recent warning is pretty much by the books, elaborating on topics such as “history of volatility,” “security concerns,” and the illicit use of the currency:
“A new product, technology, or innovation – such as Bitcoin – has the potential to give rise both to frauds and high-risk investment opportunities.”
One curious topic the SEC touched upon was how Bitcoin is “new and developing:” “As a recent invention, Bitcoin does not have an established track record of credibility and trust. Bitcoin and other virtual currencies are evolving.”
This statement was backed up by citations of the recent Mt Gox collapse, where over 600,000 bitcoins went missing. The reason for the disappearance is still unknown.
The digital currency’s lack of regulation, as well as it being uninsured, will leave bitcoin investors relying on other sources to help them track any money that is lost.
Along with the alleged fragility of Bitcoin’s security, the SEC also wants newcomers to be aware of blatant fraudulence of “Scam artists [that] take advantage of Bitcoin users’ vested interest in the success of Bitcoin to lure these users into Bitcoin-related investment schemes.”
The practical advice of the SEC comes as no surprise. Even the North American Securities Administrators Administration listed virtual currencies as one of the top 10 investor threats. The rise of Bitcoin’s popularity will only put it under the microscope of national governments for years to come. Bitcoin enthusiasts should heed this obvious advice, but will no doubt shoo a few curious newbies away.
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