The Securities Exchange Commission (SEC), US Government agency, has issued a warning about cryptocurrency’s associations with Fraud and Ponzi schemes. They issued a statement warning that:
They are more likely to be used by fraudsters to perpetrate fraudulent investment schemes.
Dara Kerr, writing in CNET, reports that the US Securities and Exchange Commission (SEC) issued an advisory on Wednesday that warned potential investors to be wary of Bitcoin and other cryptocurrencies. The advisory states that:
“Both fraudsters and promoters of high-risk investment schemes may target Bitcoin users. The exchange rate of U.S. dollars to bitcoins has fluctuated dramatically since the first bitcoins were created. As the exchange rate of Bitcoin is significantly higher today, many early adopters of Bitcoin may have experienced an unexpected increase in wealth, making them attractive targets for fraudsters as well as promoters of high-risk investment opportunities.
Fraudsters target any group they think they can convince to trust them. Scam artists may take advantage of Bitcoin users’ vested interest in the success of Bitcoin to lure these users into Bitcoin-related investment schemes. The fraudsters may be (or pretend to be) Bitcoin users themselves. Similarly, promoters may find Bitcoin users to be a receptive audience for legitimate but high-risk investment opportunities. Fraudsters and promoters may solicit investors through forums and online sites frequented by members of the Bitcoin community”
The SEC went on to point out that, in the event of a fraud being perpetrated, Law Enforcement officials may experience significant difficulties in investigating illegal transactions. They point out that:
“Potential investors can be easily enticed with the promise of high returns in a new investment space and also may be less skeptical when assessing something novel, new and cutting-edge.”
The SEC advisory on cryptocurrencies acts to warn people on the dangers of cryptocurrencies, and people take advice from the SEC. There clearly have been issues with Bitcoin price volatility. There have also been issues with loss of investments from Mt. Gox, as well as Flexcoin, to name but two. However, the cryptocoin community has learned a lot from these events. People are now minimizing the amount of time that cryptocoins sit in exchanges, they are wary of another Mt. Gox, and the losses that might entail. Bitcoin price has taken many hits as a result of the collapse of Mt. Gox, and the bad publicity Bitcoin suffered as a result of this collapse. Bitcoin price was $2 in 2011 and rose to peak at over $1,000 last November. Bitcoin price is currently hovering in around the $450 mark.
Governments like cash, they like banks; they dislike cryptocoins. I have written on Bank’s hatred of Bitcoin.previously. But an advisory from the SEC, and warnings from banks and governments alike do no favours for Bitcoin price. As people, unfamiliar with owning/using bitcoins see warnings about the use of cryptocurrencies they probably, reasonably in light of what they’ve heard, decide to steer clear of crypto. In order to continue the revolution Cryptocoin use must grow. The constantly quoted decline in Bitcoin price is doing us no favors either.
We have learned from Mt. Gox. Let us move on, we need to bring the general public with us. It took people a long time to adapt to computers. Perhaps we need to continue to publicize cryptocoins. We need to sell the benefits. The banks are shouting. The Governments and their agencies are shouting. Perhaps, this is a sign of our progress. We are now a threat. There is an old Irish saying that relates to a big business threatening a smaller, newer one:
“When the big dog howls: it’s hurt!”