Consumers could be headed for trouble when they turn over bank and brokerage pass codes to investment advisers or get pulled into investment scams involving digital currencies, state securities regulators said.
The North American Securities Administrators Association recently added the two technology-related issues to its annual list of top investor threats.
The regulators’ organization said digital currencies, such as Bitcoin, offer consumers another way of paying for goods and services, but they also provide “fertile ground for scam artists to capitalize on …(their) increasing popularity and acceptance.”
The regulators said that digital currencies are highly volatile and the concept is difficult for even the sophisticated investor to understand.
Bob Webster, director of communication for the association, said the warning was not about using Bitcoins or other virtual currencies, but about con artists using Bitcoin as a cover or investment lure.
Putting virtual currencies on the association’s list will “raise some flags (and) put this on investors’ watch,” he said. “Investors should try to learn and understand more about Bitcoin.”
Bitcoin’s website notes the volatility of the currency and risks from trying to get rich from using the new currency. The website also says, “Bitcoin has no official organization, individuals with authority, nor spokespeople.”
A co-founder of BitPay, a company that specializes in processing Bitcoin payments, agreed with the association’s assessment of the danger from virtual currencies. Stephen Pair, who is also BitPay’s chief technology officer, said in an email: “For anyone that does not understand decentralized, cryptographic currencies like Bitcoin, it is not a good idea to invest in them.
“Aside from the fact that they are very new with a short track record, safely storing large amounts of them requires skill and experience in computer security,” he said. “The NASAA is correct in stating that scam artists are attempting to capitalize on the rising popularity of Bitcoin.”