The Financial Industry Regulatory Authority (FINRA) has just put out a new alert to investors regarding bitcoin. The agency is basically warning investors via a press release that buying and / or using any digital currency carries risks. And that warning goes beyond just the rapid fluctuation of the crypto-currency’s value.
FINRA sees fraud risks in bitcoin
The regulator noted that although there’s “significant risk” in the speculative trading of bitcoin, there is also “the risk of fraud related to companies claiming to offer Bitcoin payment platforms and other Bitcoin-related products and services.” FINRA basically wanted investors to know that some fraudsters see the digital currency as a way to scam money out of them.
The agency also referred to the dangers of bitcoin being stolen by hackers. Mt. Gox may be the most prominent, but there have been other bitcoin-related companies which have been targeted by hackers and had their currency stolen. Flexcoin was also targeted by hackers recently and has since shut down operations.
In addition, regulators remind investors that investments made into the digital currency are not backed by safety guarantees like bank deposits are.
FINRA not the first to warn consumers
Of course the agency isn’t the first one to warn consumers about the risks. The Securities and Exchange Commission shut down a bitcoin fraud scheme like what FINRA is warning about just last month. The scheme guaranteed returns of between 2% and 3% every week, which of course is a red flag.
Late last year, a European watchdog group warned about the volatility of digital currency prices, emphasizing again that they are not regulated, so investors risk losing everything they put into the currency.
This likely won’t be the last word from regulators regarding digital currencies. U.S. Sen. Joe Manchin (D-WV) called for regulators to ban bitcoin last month, although we haven’t heard anything more regarding that.