The Securities and Exchange Commission has warned investors to be careful with bitcoin investments.
While the US regulatory group is not asking investors to give the virtual currency a wide berth, it wants to make it known than that the shadowy cryptocurrency is fertile ground for a wide range of scams.
Investors should be wary because the digital currency is new and different and its recent surge in value can seem attractive to uninformed investors, the SEC said.
The regulator put an alert that’s partly quoted on NBCNews as reading:
“Potential investors 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.”
While bitcoin is a new idea for investing, the advice from SEC for identifying scams would work with any other type of general fraud: Keep away from trading that seems too good to be true. For instance, investors are being urged not to succumb to high-sales pressure.
But bitcoin’s distinct weaknesses become evident when an investor gets cornered. The virtual currency is hard to trace, international and unregulated by any central authority or government. It’s not easy for law enforcement to recover or freeze associated ill-acquired bitcoin funds.
According to PCWorld, the SEC may have to rely on traders or exchanges when investigating possible fraud for lack of a better alternative.
For persons who choose to invest in the currency, SEC said bitcoin is not ensured, has a reputation of volatility and security issues on top of being a new type of investment.
The advisory from SEC is one of several cautionary pronouncements from regulatory groups, who have commenced to issue alerts as the bitcoin trade grows- and as it suffers severe blows such as the collapse of the once largest bitcoin exchange in the world Mt.Gox.
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To contact the reporter of this story; Deepak Tiwari at firstname.lastname@example.org