Cryptocurrency caution: buyers beware the cybercash hype

Ever since bitcoin's meteoric rise in late December, an influx of people havedecided to buy some digital coin overwhelming some B.C. brokers who apologized for delays, backlogs and, in one case, a freeze on new registrations.

Entrepreneur Robert Meisterhelped oneVancouver payment processor get a foothold and saw "significant gains" in all cryptocurrencies. He said there are huge opportunities, butpeople need to understand what they are investing in.

"I've had my parents ask me. Should I be investing? I can't say yes or no," he said.

It's about so much more than bitcoin now.

Show me the $

Bitcoinisn't a physical coin but a digital currency invented in2009.

People scoffed at the concept of bits of computer code assigned a monetary value.

Then bitcoin hit a peak value of $24,000 in late 2017.

Now there are more than 1,300 cryptocurrencies worldwide.

Services offering to help people buy and trade the latestinitial coin offering or ICOare proliferating.

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But not all futurists embrace this.

University of British Columbia Entrepreneurship Professor Marc-David Seidel is a cryptocurrency skeptic.

"I would never touch them," he said.

He'swary about the companies set up to help trade this currency.

He said buyers are required tohand over the key to their digital wallet to strangers running untested processing companiesand that's precarious.

Crypto-exchanges are not regulated like banks.

Depending where they are based, they may not be regulated at all.

So, if a deal goes sideways, the buyer may end up having to sue wherever the seller or brokerage isbased, which can be expensive and fruitless.

In B.C., cryptocurrencies are usually considered securities.

A security is something bought as an investment on the expectation of turning a profit.

"Anything, from an orange to a chinchilla, can be a security. It's when you are buying a piece of somebody else's dream," saidCristieFord, financial regulation expert with theUniversity of British Columbia's Centre for Business Law.

Companies that trade them are required to disclose basic information to theB.C. Securities Commission.

But despite disclosures, the buyer is left to decode and assess the risks.

"It's not the job of a securities commission to test whether or not you are investing your money in something sound. They don't kick the tires on a cryptocurrency. And they don't check whether or not [an exchange] isa safe place for people to put their money. That's just not their job," said Ford.

She fears the current digital coin craze feels hype-driven.

"It doesn't feel very different to me than 1999 and the dotcom boom. By the time taxi drivers and your grandmother are talking about something, it's probably a bubble," said Ford.

Ripe for fraud

Last year the head of the U.S. Securities and Exchange Commission went even further, warning cryptocurrency investors of scams and criminal activity in the sector and urging them to be sure they were safe from theft and hacking.

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"You can lose a significant amount of money in a very short period of time without you even knowing. Not really based on the fundamentals of economics or even what's going on in the world," said Meister.

He believes it can be navigated with the help and experience of guides or brokers.

And there is money to be made.

But Seidel offers an alternative plan.

Skip it, until it's less volatile.

He's watched thecryptocurrency world unfurl at a furious pace.

Though he sees great promise in the emergingfinancial form, he says people who need help buying it are over their heads.

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He points to disasters like Mt. Gox, a Japanese firm that was the world's leading bitcoin exchange before a hacker breach led to its collapse in 2014 andloss claims of an estimated $2.4 trillion more than the annual gross domestic product of France.

So, for now even some of the most tech-savvy futurists, like Seidel, are taking a pass, just in case profitsdissolve into ether instead of Ethereum.