The state of Massachusetts is quite possibly the first to issue a formal investor advisory on bitcoin. In this case, the local government advises against the cryptocurrency.
Tread Carefully with Crypto Investing
According to William Galvin, Secretary of the Commonwealth, the digital currency is entirely speculative and should be avoided at all costs. “It doesn’t pass the smell test,” he told CNBC.
“It’s subject to manipulation because no one can explain it, no one can control it. There is no product here.”
The Securities Division of Massachusetts is responsible for the protection of investors and the state from fraud and investor abuse. As such, Galvin sees Bitcoin as a risk he is determined to neutralize for the citizens of the state, as well as the rest of the world to the extent that it is possible.
Galvin released a public statement outlining seven key reasons why people should tread carefully when it comes to cryptocurrency investing.
“Bitcoin is just the latest in a history of speculative bubbles that most often burst, leaving the average investors with a worthless product. Chasing the next best thing will, more often than not, end in disaster for the average investor.”
Gargantuan Returns Engender Frenzy
The unprecedented mile-high returns that some high-profile investors have gained have contributed to a global frenzy. One such example being the Winklevoss brothers, who have seen their initial investment of $11 million rise close to $2 billion over four years.
The former Olympians achieved somewhat of a celebrity status after becoming the first investors to reach the Bitcoin billionaire club. Despite their incredible gains, both brothers still maintain that they will not sell, prompting thousands of others to follow their lead.
Despite the potential for massive returns, there is no guarantee that prevents investors from losing some or even all of their initial investment, as it is not backed by any government or regulatory body.
William Galvin spoke of this risk in his public statement, saying: “The unregulated and ambiguous nature of Bitcoin provides a fertile ground for investment scams and other financial fraud, which can cause Bitcoin investors to lose their money.”
Jay Clayton also issued a statement warning investors and members of the general public against investing in Bitcoin and cryptocurrencies, with his being put forward on December 11, 2017.
From his position as chairman of the United States Securities and Exchange Commission, Clayton informs readers that to date, there have been no initial coin offerings registered with the SEC, and implored investors to exercise extreme caution should they choose to invest in them.
“There is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation. I encourage Main Street investors to be open to these opportunities, but to ask good questions, demand clear answers and apply good common sense when doing so.”
The Financial Industry Regulatory Authority, although without any jurisdiction over the cryptocurrency, has also issued an alert on stock scams relating to cryptocurrency, last updated December 21, 2017.
“It’s easy for companies or their promoters to make glorified claims about new products, services, and other cryptocurrency-related connections. And, even when legitimate companies flock to a hot, new sector, fraudsters almost always follow suit,” warned the regulatory body.