Bitcoin has gotten a lot of attention lately, not just from investors, but also from regulators in multiple countries around the globe. Regulators in Europe even issued a warning about the digital currency recently, warning investors about the dangers associated with investing in it. Now a report from Rebecca Burn-Callander of The Telegraph examines several reasons bitcoin just might be the most dangerous currency in the world.


Bitcoin remains volatile

The price of a bitcoin has been bouncing around wildly for nearly a year now, and the value of the currency can change at nearly a moment’s notice. It doesn’t take much news about the currency to send its value skyrocketing or plummeting. Today the digital currency is trading for nearly $1,000 on Japanese exchange Mt. Gox and almost $900 on U.S.-based exchange and digital wallet Coinbase.

Because of the volatile nature of bitcoins, there’s just no telling where they will go next. As a result, investors stand to lose millions at the drop of a hat—if they’re not careful about their investment.

Bitcoin provides untraceable way to pay, but…

As knowledge of the existence of bitcoins spread, more and more retailers are beginning to accept the digital currency as payment., Inc. (NASDAQ:OSTK) recently started accepting the currency (albeit in a roundabout way through a digital wallet company). But the reality of what bitcoins are means that payments can be made without transactions being traced. Because of this fact, the currency has been popular with criminals.

According to Burn-Callander, bitcoins are “funding the dark web” and are popular among arms traders, drug dealers and even assassins. In fact, she mentions a website people can visit to put a bounty on anyone’s head—using bitcoin as payment.

The untraceable nature of bitcoin also means that when the code for a particular bitcoin is lost, then it’s gone forever. Hackers have broken into digital wallet companies and stolen millions of dollars’ worth of bitcoin. And one bitcoin owner accidentally threw away the thumb drive which held his bitcoin, and he lost $9 million because of it.

Regulators interested in bitcoin

And then there are concerns about tax agencies and how they are going to deal with the digital currency. The U.S. Internal Revenue Service has set up a new division which will specifically examine how to deal with people who attempt to dodge taxes by paying in bitcoin. In addition, regulatory agencies in India disagree about the digital currency, with taxing officials trying to figure out how to tax it and other regulators in the country just saying that bitcoin is illegal.