S.E.C. cautions on use of Virtual currencies

The United States Security and Exchange Commission (SEC) has issued an alert cautioning investors on the unique dangers attached to trading and using virtual currencies such as Bitcoin.

In an advisory headed “Investments involving Bitcoin present unique risks” the SEC points out that governments and banks are not associated with virtual currencies and these are therefore not covered by either government or bank insurance measures.

That means that losses due to a variety of causes cannot be recovered and the use of virtual currencies is not officially and stringently regulated and policed.

The extreme volatility associated with such currencies also represents a serious risk, the advisory warns.

Fraud is another risk to users of virtual currencies, the SEC warns, especially in relation to Bitcoin investment schemes, where the innovative and volatile nature of the currency represents a danger at the hands of fraudsters to those that do not yet fully understand the characteristics and history of the products, and are blinded by “get rich quick” success stories.

The SEC warns that before involving themselves in virtual currency deals, investors should ensure that they have studied the products and the market and are familiar with both risks and advantages.

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