The number of states that have so far made public comment (or have otherwise already issued some sort of consumer/investor alert) on digital currencies is growing rapidly.
Most recently, we saw that California and New Mexico officials were warning the public of potential risks, and now we can add the “Potato State” to the list.
Idaho’s Department of Finance on Tuesday released a guidance entitled It pays to know what’s in your e-Wallet, which aims to inform citizens of the states of potential dangers one may encounter upon investing in a digital currency like bitcoin.
And what better way to scare the pants off a newcomer than to bring up the Mt. Gox debacle right away?
Of course, it probably should be mentioned. A French man-child did manage to lose hundreds of millions of dollars worth of bitcoin, so anything is really possible here.
The other points made in the news release are things we’ve heard before, quite frankly:
“Unlike traditional currency, these alternatives typically are not backed by tangible assets, are not issued by a governmental authority and are subject to little or no regulation,” said Gavin Gee, director at the Department.
“The value of virtual currencies is highly volatile and the concept behind the currency is difficult to understand even for sophisticated financial experts. Investors should be aware that investments that incorporate virtual currency present very real risks.”
Some of the other points made by Gee are actually quite valid:
- Digital currencies are subject to minimal regulation
- Assets are not backed by the FDIC
- Digital currencies are volatile
- Investors may be dealing with unregulated companies (see Mt. Gox)
- Investors must rely that their computers are secure to use digital currencies
If you would like to take a look at Mr. Gee’s advisory for yourself, follow this link.