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Secretary of state issues caution about virtual currencies

Connie Lawson, Indiana’s secretary of state, today cautioned investors to consider the risks associated with virtual currencies, such as bitcoin.

Virtual currency can be earned, bought or sold. It can be used to buy goods and services from businesses that accept it. The currency is stored in a digital file, known as an electronic wallet. Owners have no options if virtual currency disappears. By contrast, bank deposits are insured up to $250,000 by the Federal Deposit Insurance Corp.

“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,” Lawson said in a statement. “The value of virtual currencies is highly volatile, and the concept behind the currency is difficult to understand even for sophisticated financial experts.”

Carol Mihalik, Indiana securities commissioner, echoed Lawson’s concerns.

“Investors should be aware that investments that incorporate virtual currency present very real risks,” she said in a statement. “It pays to do your homework before you invest in any investment opportunity, including virtual currency.”