US regulator warns consumers of Bitcoin risks

Mar 11, 2014
A Bitcoin dispensing machine is seen at a shopping mall in Singapore on March 6, 2014

A US financial regulator warned consumers Tuesday that using the online currency Bitcoin is fraught with risks including theft by hacking and fraud.

The Financial Industry Regulatory Authority issued the general warning amid a spate of scandals involving the , which has rocketed in popularity and been the focus of much speculation over the past two years.

"Buying and using digital currency such as Bitcoin carry risks. Speculative trading in bitcoins carries significant risk," FINRA said.

"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."

The agency, which regulates the securities industry, said , where users hold their Bitcoin on computer files, are vulnerable to theft and have none of the legal protections and guarantees that depositors in US banks and credit unions enjoy.

Bitcoin transactions—designed to transfer funds between two parties without a bank or other intermediary—are also subject to fraud and robbery, and are irreversible, FINRA added.

It also pointed to the use of Bitcoin in and drug payments. The agency said that exchanges involved in such activity could be shut down, costing other users not involved in illegal activity.

FINRA noted the closure of Japan-based Mt Gox, once the largest Bitcoin exchange which said it had been robbed of nearly half a billion dollars' worth of the digital currency, most of it clients' money.

Mt Gox filed for bankruptcy protection in Japan at the beginning of this month and in the United States on Monday.

Explore further: Head of troubled bitcoin exchange still in Japan

add to favorites email to friend print save as pdf

Related Stories

Head of troubled bitcoin exchange still in Japan

Feb 27, 2014

(AP)—The head of troubled bitcoin exchange Mt. Gox says in a web post that he is still in Japan, and "working very hard" to find a solution to the Tokyo-based organization's problems.

Recommended for you

Digital dilemma: How will US respond to Sony hack?

Dec 18, 2014

The detective work blaming North Korea for the Sony hacker break-in appears so far to be largely circumstantial, The Associated Press has learned. The dramatic conclusion of a Korean role is based on subtle ...

UN General Assembly OKs digital privacy resolution

Dec 18, 2014

The U.N. General Assembly has approved a resolution demanding better digital privacy protections for people around the world, another response to Edward Snowden's revelations about U.S. government spying.

Online privacy to remain thorny issue: survey

Dec 18, 2014

Online privacy will remain a thorny issue over the next decade, without a widely accepted system that balances user rights and personal data collection, a survey of experts showed Thursday.

Spain: Google News vanishes amid 'Google Tax' spat

Dec 16, 2014

Google on Tuesday followed through with a pledge to shut down Google News in Spain in reaction to a Spanish law requiring news publishers to receive payment for content even if they are willing to give it away.

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.