The S.E.C., for its part, has been warning investors of the danger of “potential investment scams” involving bitcoin and other virtual currencies. In one case, it has charged Trendon T. Shavers, a Texas man, with running a bitcoin-based Ponzi scheme with the promise of vast riches.
“Con men read the headlines like everyone else,” said Lori Schock, director of the S.E.C.’s Office of Investor Education and Advocacy. “Bitcoins sound sexy and new, but at the end of the day, if they’re making claims about limitless wealth from unregistered investments it comes down to an old-fashioned Ponzi scheme.”
The agency is also studying a legitimate bitcoin proposal by Cameron and Tyler Winklevoss, the technology investors best known for their involvement with Facebook, to open anexchange-traded fund, or E.T.F., that tracks the bitcoin market. If the E.T.F. is ever approved, a fund based on a volatile virtual currency is hardly likely to be a safe, core holding for buy-and-hold investors.
In the meantime, the virtual currency’s soaring value has inspired tales like this one: Kristoffer Koch, 29, of Oslo, told the BBC last month that he bought $22 worth of the currency while doing technical research on it four years ago. He promptly forgot about it. When he unlocked his long dormant account recently, it was worth $850,000.
Even with all of its problems, the eventual creation of a reliable, decentralized, peer-shared, computer-based currency remains the holy grail in some circles. Back in 1999, Milton Friedman, the Nobel laureate who remains the guiding light of many libertarians, predicted its eventual arrival. He saw the Internet as a congenial environment for innovators. Markets would flourish in cyberspace, freeing people from what he considered the stifling grasp of a paternalistic and inefficient government. But one ingredient was missing, he said. He called it “a reliable e-cash.”