The Financial Industry Regulatory Authority (FINRA), the largest independent regulator in the US, issued an investor alert about bitcoin on 11th March, calling the digital currency “more than a bit risky” as part of a new warning to consumers and investors.
FINRA said the alert aims to raise awareness about the downsides of bitcoin investments in light of the recent high-profile struggles of bitcoin business.
Read the release:
“FINRA is issuing this alert to caution investors that buying and using digital currency such as bitcoin carry risks. Speculative trading in bitcoins 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.”
In particular, the released noted the recent troubles of Japan-based exchange Mt. Gox and Imogo Mobile Technologies, which was suspended by the SEC following its introduction of a bitcoin payment platform in January.
Hacking, volatility top FINRA’s listed risks
FINRA detailed what it referred to as the “numerous risks” associated with buying, selling and using bitcoin, including that bitcoin is not legal tender in the US.
The agency further emphasized how bitcoin is susceptible to fraud, saying:
“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.”
Additional comments covered how bitcoin exchanges are volatile and could close at any time, and that bitcoin transactions, by nature of their design, are not reversible like other popular forms of payment.
FINRA solicits tips and information
The announcements follows other notable statements from US policymakers, who have been increasingly outspoken about digital currencies, including US Senator Joe Manchin, top Alabama securities regulator Joe Borg and Federal Reserve Chairwoman Janet Yellen, as well as their intent to follow their progress.
FINRA, likewise, suggested it will be monitoring events in the digital currency space.
The regulatory body ended the release by encouraging those who have been defrauded by a securities professional or firm to file a complaint with its representatives or to contact its support lines with tips and information.
Image credit: FINRA office via GlassDoor