INDIANAPOLIS | Despite increasing merchant acceptance of Bitcoin and other virtual currencies, Indiana's securities regulatory agency is advising Hoosiers to be wary of the new digital forms of money.
"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 Secretary of State Connie Lawson.
"The value of virtual currencies is highly volatile, and the concept behind the currency is difficult to understand even for sophisticated financial experts."
Virtual currency is an electronic medium of exchange that can be bought or sold through virtual currency exchanges and used to buy goods or services where accepted, typically online retailers.
Recently some brick-and-mortar merchants began accepting payments from electronic wallets containing virtual currency, commonly paid using a smartphone.
The Federal Election Commission last week even authorized Bitcoin donations to political action committees.
However, Indiana Securities Commissioner Carol Mihalik said some users of virtual currencies have seen their money disappear due to online theft and hacking.
She urged Hoosiers to be cautious.
"Investors should be aware that investments that incorporate virtual currency present very real risks," Mihalik said. "It pays to do your homework before you invest in any investment opportunity including virtual currency."
Unlike traditional bank accounts denominated in dollars, virtual currency accounts are not insured by the Federal Deposit Insurance Corp., which insures bank deposits up to $250,000.