Bitcoin Continues to Be of Concern to Regulatory Authorities
It was just a matter of time before we got to the point of using electronic currency to buy, sell and trade just about anything. Although there are a few detractors who prefer to go old-school by sticking to cold, hard cash, the use of credit cards, debit cards, PayPal, and other non-monetary forms of financial transactions have become commonplace. It spite of current means of meeting financial obligations, there seems to be a new kid in town. Enter Bitcoin and the virtual wallet. There are many 21st Century consumers and investors who see Bitcoin as the future of money and can’t wait to jump onto the digital money bandwagon.
Those proponents of a digital money system will argue that ever since man developed a barter system to acquire the goods and services he needs, money has had no intrinsic value. Whether it is cockle shells, oxen, or gold, the value of money is an agreed-upon system of trade.
Not so fast, say many regulators. It may sound like a good idea to the many who anticipate the evolution of our monetary system, but organizations such as the Financial Regulatory Authority (FINRA) and the Securities Exchange Commission have offered up warnings pertaining to Bitcoin. These regulators issue concerns about Bitcoin as it poses both significant trading risks as well as great risk of fraud to companies who use Bitcoin payment platforms and other services and products that are related to Bitcoin. A recent FINRA Investor Alert is just one of many such warnings from regulators as the industry understandably senses a very real threat of fraud for those investors who look to Bitcoin to make a quick profit.
“Speculators drawn to Bitcoin trading should understand that Bitcoin prices have fluctuated widely, and wildly, almost from the currency’s inception,” said Gerri Walsh, FINRA’s Senior Vice President for Investor Education. “Investors looking to get in on the ground floor of a Bitcoin-related company should realize that fraudsters may see the latest digital currency trend as a chance to steal their money through old-fashioned fraud.”
The Securities Exchange Commission has had its own concerns about the use and possible misuse of Bitcoin. In 2013, the SEC charged a Texas man with virtual currencies fraud in an alleged Ponzi scheme. Additionally, an SEC press release dated February 19, 2014 stated that it had temporarily suspended trading of securities of Imogo Mobile Technologies Corp. due to concerns raised about the accuracy and adequacy of information that the company was disseminating to the public regarding its business.
Many of the supporters of Bitcoin like to refer to the disintermediation of the Bitcoin system, and there in lay many of the issues that set off alarm bells for regulatory organizations. Bitcoin is tracked based upon a fully virtual world whereby auditors (referred to as miners) enter and monitor information pertaining to who has how many Bitcoins, how they obtained them, and in what transactions they are used. Although much of our lives are impacted by online activities, regulatory agencies such as the SEC and FINRA deal on a daily basis with fraud committed through network transactions.
The major concerns surrounding Bitcoin are that, like with most transactions that are handled digitally, platforms that buy and sell Bitcoins can be hacked, exposing Bitcoin-related transactions to fraud or creating transactions which are in themselves fraudulent. Additionally, the safety measures that in are place to protect banks and credit unions do not exist for Bitcoin. This is greatly evidenced by the fact Mt. Gox, a Tokyo-based trading company that handled upwards of 70% of Bitcoin transactions, suspended trading last month and closed up shop. The company stated that Bitcoins valued at more the $450 million were missing and likely stolen, according to USA Today. It has since found less than one-quarter of that amount.
If you feel that you have been the victim of Bitcoin fraud or suffered financial losses as a result in investments into Bitcoin, please call the Blum Law group at 877-STOCK-LAW for a free consultation.