The U.S. Securities and Exchange Commission (SEC) issued an alert to investors Wednesday warning about the risks of trading Bitcoins and other virtual currencies.
The SEC said that investors might be lured by the potential investments in something “novel, new and cutting-edge” but that Bitcoin represents a significant risk. “A new product, technology, or innovation – such as Bitcoin – has the potential to give rise both to frauds and high-risk investment opportunities,” the SEC said. New technologies make Bitcoin ripe for fraudulent schemes, and the victims of theft may have limited options for recovering lost currency. In addition, Bitcoins are not insured and transfers of the currency are difficult to trace.
“Scam artists take advantage of Bitcoin users’ vested interest in the success of Bitcoin to lure these users into Bitcoin-related investment schemes,” the notice warns.