Finland's financial regulation body has issued a warning about the dangers of investing in cryptocurrencies like Bitcoin.
The Finnish Financial Supervisory Authority says that cryptocurrency Bitcoin are now being used by speculative investors and increasingly risky.
All cryptocurrencies are not the same. Quite a few of them appear to be outright scams or pyramid schemes, while others like Bitcoin are more widely used and considered safer and less volatile.
This week Bloomberg and other financial news outlets reported that Bitcoin's value has risen more than 700 percent since the beginning of the year. The virtual unstoppable inflation of the computerised currency shows no sign of abating, Bloomberg wrote earlier this week.
The value of a less publicised cryptocurrency, Etherium, has increased in value even more than Bitcoin.
This trend of inflation helped bring the cryptocurrency market to a value of more than 203 billion euros, according to cryptocurrency tracking site Coinmarketcap. At the beginning of January of this year, a single Bitcoin was valued at about 1,000 US dollars, while now, just 11 months later, the same Bitcoin is trading at more than 8,000 US dollars, according to the site.
Regulator warns potential investors
Rumours of huge, fast returns on Bitcoin and cryptocurrency investments have prompted Finns to invest in them, and the value of the currencies is not tied to anything stable, the authority says.
Anticipated investment returns are only based on the idea that another investor will buy more of the currency at a higher price, according to the Financial Supervisory Authority.
This sort of investment, the regulator says, always carries significant risks. The market prices of cryptocurrencies have seen massive fluctuation. Some of the currencies on the market are simply scams, the authority said.
Finland's financial regulator body also issued a warning about creating new cryptocurrencies, also known as ICOs (Initial Coin Offerings), which have also multiplied in number this year.
An ICO is an offer to investors to help form a new cryptocurrency system in exchange for a piece of the new currency. Investors can pay in other cryptocurrencies or in traditional, official currencies like cash or bank transfers.
ICOs have also fallen afoul of the European Securities and Markets Authority (ESMA), which last week warned about the risks surrounding ICOs for investors and also about the rules which firms involved in them need to follow.
European warnings sound off
ESMA said it is concerned that firms involved in ICOs may conduct their activities without complying with EU laws and alerted investors about the high risks involved in cryptocurrencies.
The European agency said ICOs can potentially be unregulated or even outright scams. ESMA said that important information on the ICOs could be partially lacking or misleading.
There are chances that cryptocurrency investors can lose part or all of their investment money, ESMA said.
An example of a suspected shady ICO was reported by TechCrunch as recently as Tuesday. A firm called Confido, whose ICO purportedly would allow "safe and trustless cryptocurrency payments" raised some 400,000 US dollars and then vanished.
The European Banking Authority made similar warnings four years ago. The EBA warned consumers of the potential risk of theft of cryptocurrencies from digital wallets, that no consumer protection agency would be helpful in settling disputes or recouping losses and that the value of the currencies can vary or even drop down to being worthless.
When consumers make purchases using cryptocurrencies, they are not protected by laws that they would when using official currencies, the agency said.