SEC Warns 'Extreme Caution' Over Cryptocurrency Investments As Many People Take Out Mortgages To Buy Bitcoin (qz.com)

The head of the US Securities and Exchange Commission has warned bitcoin and other cryptocurrency investors to beware of scams and criminal activity in the sector. In the financial regulator's strongest statement yet, SEC chair Jay Clayton said: "If a promoter guarantees returns, if an opportunity sounds too good to be true, or if you are pressured to act quickly, please exercise extreme caution and be aware of the risk that your investment may be lost." The warning comes at a time when many people have begun to take out mortgages to buy bitcoin. From a report: Clayton's statement was also issued the same day the SEC took regulatory action to halt an initial coin offering (ICO). "Recognize that these markets span national borders and that significant trading may occur on systems and platforms outside the United States. Your invested funds may quickly travel overseas without your knowledge," he wrote, in a sentence that was in bold. Clayton's statement referenced some of the crucial debates that have swirled around the rise and regulation of crypto-assets like bitcoins. Are these currencies? Commodities? Or securities? The statement notes in a footnote that bitcoin in the US has been designated a commodity. But the broader answer seems to be that while it depends from case to case, initial coin offerings, at least, are more likely to be scrutinized and held to the same bar as securities offerings.

Comments

More like a giant poker game

[timholman]

Are these currencies? Commodities? Or securities?

No, more like a giant poker game where a few people will win and a lot more will lose. Oh, and the game may or may not be fixed, but if it is, there's not a thing you can do about it.

Or more accurately, like the pyramid parties and pyramid letters that were so popular back in the early 1980s, where a bunch of people would pass money to the people at the top of the pyramid. You could make money at it, provided you brought in some greater fools to the next party to pass money to you.

Bitcoin is a zero-sum game. No one is walking away from the table with any money that didn't come from someone else's pocket. Or in some cases, from someone else's credit card, mortgage, retirement account, or college fund.

benis

[Anonymous Coward]

Mortgage guy here. While I'm sure SOME people have done this, there is absolutely no reliable tracking post-funding to see what people did with the equity in their homes. In our Loan Origination System, there is an option for "cash out debt consolidation" & "cash out home improvement" but no option for "cash out Bitcoin". I call BS

We are surrounded by bubbles

[plopez]

I am very uneasy. There seem to several bubbles going which in aggregate or perhaps 1 to 3 happening at the same time spells disaster:

1) Cryptocurrencies. Yes, plural.
2) AI
3) Financial markets
4) Housing
5) Student loans
5) Health care
6) Tech in general, a run up in price of things such as FB and Tesla.
7) Foreign and domestic real estate

And probably more I can't think of right now. A collapse in the NYSE exchange would have a large impact on the global economy but 2 or 3 smaller ones together might have a ripple effect causing a larger collapse. I think we live in fragile times. If you look at history there were bubbles about every 10 to 20 years after the lessons of the last collapse fades from memory. We're about due.

A Pyamid of speculation

[evolutionary]

People buy early and low, speculation drives demand high with no real assets backing up the worth save pure speculation. people early sell to people buying later. More people later than earlier. People at the upper end of the pyramid make crazy profits, people who buy are left holding the bag (the larger number of masses at the base supporting the profits of the top) when this balloon pops. once upon a time we had the gold standard.

When we didn't have enough gold to back it up, so...we abandoned it for speculative currency. The one definite thing about technology, is enables us to accelerate what we normally do, making the flaws in our systems more visible. Samuel Clemens write about the stock market in Huckleberry Finn, and Sir Conan Doyle mentioned it in his writings of Sherlock Holmes as well. neither gave a pretty picture. If they could only see this...