The hype surrounding digital currencies can cause a “fear of missing out” and risks consumers being lured into such investments with “delusions of quick riches”, warned a British watchdog
ON SEPTEMBER 13th the price of Litecoin briefly jumped by nearly 30% following a fake press release claiming that Walmart would begin accepting the digital currency for online payments. The hoax, which managed to fool several financial-news outlets, could spur calls for greater oversight of the cryptocurrency industry.A daily email with the best of our journalismCryptocurrencies were already creating headaches for many regulators.
Policymakers are right to be concerned, particularly about frauds and scams. But it would be misleading to label all cryptocurrency investors as naive or unsophisticated.by Raphael Auer of the Bank for International Settlements and David Tercero-Lucas of the Autonomous University of Barcelona suggests that American owners of digital currencies tend to be well-educated and earn high incomes.
The researchers found that characteristics vary across different cryptocurrencies. Owners of XRP and ether, for example, are the most educated; Litecoin owners the least educated. Owners of XRP, ether and Stellar are the highest earners; investors in bitcoin earn the least. The pool of investors in cryptocurrencies is much wider today than it was in 2019 when the Fed’s survey was conducted. At the time, cryptocurrencies were a niche investment, owned by only 1.4% of Americans. In 2020, according to the Federal Reserve, roughly 4% of Americans have cryptocurrencies in their portfolios. Still, a preliminary analysis by the authors of survey data collected last October suggests that cryptocurrencies continue to appeal mainly to young, male, well-educated investors.
The growing popularity of cryptocurrencies could prompt regulators to step in. Messrs Auer and Tercero-Lucas argue that, since the objectives of investing in crypto assets are similar to those for more traditional assets, the regulatory framework should be similar, too.
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