Regulators in Texas have warned digital currencies like bitcoin are volatile and probably more suited to young people than retirees, the Dallas Morning News has reported.
Describing digital currencies as "very, very trendy" right now, Joseph Rotunda, director of enforcement at the Texas State Securities Board, said that all the "buzz" around digital currencies had led people to look only at the positives and not the risks.
Rotunda said it wasn't just about bitcoin, but the myriad other digital currencies popping up every week that presented a risk to investors.
"There’s more of them in production right now, in development. It’s a real fertile ground," he said. He admitted such investments could prove useful, but only for younger people and not those looking for future security.
Risks for unaware investors
Such warnings from government regulators have become fairly commonplace in recent months.
"In many ways, digital currencies operate as 'online cash,' only this type of currency is extremely volatile and can disappear the same way your money disappears when you lose your wallet," said John Morgan, Texas securities commissioner.
Rotunda also pointed out that trust remains a huge issue in the unregulated space, in the security systems and infrastructure, accounting practices and overall business models of those providing digital currency services.
The level of anonymity digital currencies provide users also created risks, he said, adding:
Shavers 'Ponzi' case update
Yip also referred to Texas' own Trendon T Shavers, who gained notoriety last July when he managed to raise 700,000 BTC at his company Bitcoin Savings and Trust (BTCST). The US Securities and Exchange Commission (SEC) described the operation as a bitcoin Ponzi scheme.
Shavers, incidentally, denied his was a Ponzi scheme and was actually never charged with any criminal offence. He did not accept any currency other than bitcoin, he said, and appeared not to keep any useful records of his transactions.
The SEC filed a civil complaint against him at the beginning of this month, posting a transcript of Shavers' interview online, in which he referred to his scheme as merely one of lending and bitcoin value speculation based on the fluctuating price at Mt. Gox in early 2013.
Texas longhorn image via Shutterstock
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