The Financial Industry Regulatory Authority on Tuesday warned investors of the top six reasons why buying and using digital currency such as bitcoin can be risky.
FINRA includes its list in a newly released investor alert, Bitcoin: More than a Bit Risky, which also states that while speculative trading in bitcoin carries significant risk, there is also the risk of fraud related to companies claiming to offer bitcoin payment platforms and other bitcoin-related products and services.
“Speculators drawn to bitcoin trading should understand that bitcoin prices have fluctuated widely, and wildly, almost from the currency’s inception,” said Gerri Walsh, FINRA’s senior vice president for investor education, in releasing the alert. “Investors looking to get in on the ground floor of a bitcoin-related company should realize that fraudsters may see the latest digital currency trend as a chance to steal their money through old-fashioned fraud.”
Here’s what FINRA says are six bitcoin risks:
–Digital currency such as bitcoin is not legal tender. No law requires companies or individuals to accept bitcoins as a form of payment. Instead, bitcoin use is limited to businesses and individuals that are willing to accept bitcoins. If no one accepts bitcoins, bitcoins will become worthless.
–Platforms that buy and sell bitcoins can be hacked, and some have failed. In addition, like the platforms themselves, digital wallets can be hacked. As a result, consumers can — and have — lost money.