SEC warns investors to be careful with bitcoin

The Securities and Exchange Commission warned investors to be wary of the virtual currency bitcoin.

The financial regulator cautioned that bitcoin has historically been volatile, subject to hackers, and a potential target for fraudulent schemes. While the regulator did not say people should steer clear of investing in bitcoin or other virtual currencies, it did note that there are several unique challenges to consider.

For example, since bitcoin transactions are not backed by any government or routed through traditional financial institutions, it could be difficult to trace money should something go awry, the SEC said. The SEC also said that since some early bitcoin investors have enjoyed a windfall as the virtual currency gained value compared to dollars, they could be ripe targets for people peddling fraudulent or high-risk schemes. Promoters could also lean on the personal interest many bitcoin investors have in the success of the currency to get them to invest poorly.