Beware cryptocurrencies, European authorities warn

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Citing “clear signs of a pricing bubble” and other problems, regulators in Europe warn about investing in bitcoin and other virtual currencies.

A couple of weeks after cryptocurrencies like bitcoin plunged in value, European authorities issued a warning Monday about the risks of investing in them.

Bitcoin and other virtual currencies “have shown clear signs of a pricing bubble” that could separate you from a lot of real currency, according to European supervisory authorities handling securities, banking, insurance and pensions. On top of that, cryptocurrency exchanges can have operational problems without any legal recourse right now if you lose your shirt, the European Securities and Markets Authority (ESMA) said.

Cryptocurrencies are the tech industry’s wild west. Even if you’re not investing in the thousands of virtual currencies available today or buying graphics cards at high prices to mine cryptocurrencies, there are risks that just visiting a website will make you part of somebody else’s attempt to get rich quick.

But it can’t all be dismissed out of hand. For example, the underpinnings of cryptocurrency transactions, called blockchain, are already spreading far beyond financial transactions, into everything from tracking diamonds to quickly removing contaminated food from store shelves.

Here’s the bottom line (PDF) from Monday’s cautionary notes : “You should not invest money you cannot afford to lose.”

There’s a good chance that if you sunk a lot of money into cryptocurrencies as their value soared last year, you already also noticed as their valuations plunged this year. Bitcoin is trading at a value of about $9,000, less than half its peak above $19,000 in December.

“ESMA is definitely trying to shut the stable door after the horse has bolted,” said Toby Lewis, an analyst at Novum Insights.

But that doesn’t mean the agencies should stand still. “Hopefully their warning about lack of regulation of the sector will be followed up by moves towards intelligent regulation of cryptocurrencies,” he said.

Read more at:

https://www.cnet.com/news/beware-cryptocurrency-bitcoin-investing-european-authorities-warn/

 

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