Recently the Securities and Exchange Commission (SEC) has issued a new warning about the risks of Bitcoins and other forms of virtual currencies. Bitcoins are a system of digital currency that can be used throughout the world. Unlike other online payment systems such as PayPal, there are no charges or commissions for using Bitcoins. Some speculators have gone into trading Bitcoins, which is indeed a risky investment. Unfortunately, Bitcoins are not a true currency issued by a government and regulated by any nation. Also, unfortunately, the security of the major Bitcoin exchanges has not been as secure as major banks and other major financial institutions and they have been easy pickings for hackers whose hacking into the largest Bitcoin exchange, Mt. Gox resulted in a loss of 850,000 Bitcoins and a declaration of bankruptcy by Mt. Gox. Bitcoins have also been used in Ponzi schemes and other fraudulent investment schemes where scammers take advantage of the average consumer’s lack of knowledge about Bitcoins
As an investment, Bitcoins are highly speculative and their value could easily plummet for many reasons including the general lack of security by major Bitcoin exchanges. As for using them as currency, the lack of regulation makes them a risky way to pay for goods as well as the fact that you are seriously limited as to the places that will accept Bitcoins. As with any investment, the rules for avoiding scams apply. Be wary of guaranteed high returns and don’t invest in anything unless you have investigated both the investment and the person offering to sell you the investment.