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SEC issues alert on bitcoin risks

08 May 2014  |  6181 views  |  0 bitcoin

The US Securities and Exchange Commission (SEC) is warning investors that getting involved in bitcoin is a risky business that could leave them open to fraud.

In a lengthy investor alert, the watchdog says: "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."

There is a long history of crooks using innovations in finance and technology to carry out fraud and the SEC says that investors should be cautious of "guaranteed" returns and "too good to be true" offers which could be nothing more than ponzi schemes.

And because bitcoin is difficult to trace, borderless and has no central authority it is very difficult to recover fraud losses.

The laundry list of concerns also includes the crypto-currency's volatility, government regulation, a lack of insurance and security worries relating to exchanges and wallets, especially in light of the recent Mt. Gox collapse.

Separately, over in China China Guangfa Bank and Shanghai Pudong Development Bank Co have banned their customers from using their accounts for trading bitcoins.

This comes after China's two largest bitcoin exchanges had their accounts with several banks shut last month as the country's authorities tighten their grip on the currency.

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