The North American Securities Administrators Association is warning investors to consider the risks associated with virtual currencies, particularly that the value of such currencies is volatile.
In an investor alert, “What’s in Your e-Wallet?,” NASAA explains that virtual currency is an electronic medium of exchange that can be bought or sold through virtual currency exchanges and used to purchase goods or services where accepted.
These currencies are gaining in both popularity and controversy and are stored in an electronic wallet, also known as an e-wallet, which is a digital system that allows payments online via a computer or mobile device. So-called cryptocurrencies are designed to make transactions difficult to trace.
“Unlike traditional currency, these alternatives typically are not backed by tangible assets, are not issued by a governmental authority and are subject to little or no regulation,” said Andrea Seidt, NASAA president and Ohio Securities Commissioner, in a statement.
“The value of virtual currencies is highly volatile and the concept behind the currency is difficult to understand even for sophisticated financial experts,” Seidt said. “Investors should be aware that investments that incorporate virtual currency present very real risks.”