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More and more governments started to take actions to prevent the risks from blowing up, while experts and financial institutions are issuing warnings for investors against overheating cryptocurrencies.
Robert Shiller, a Nobel laureate and professor of economics at Yale University, said earlier this month that Bitcoin resembles a bubble because bubbles are promulgated by stories.
Shiller, who won the Nobel Prize in Economics for his work on economic bubbles, told media what's driving bitcoin at the moment is only a story, which started from its mysterious creator, Satoshi Nakamoto, who created the currency and then disappeared. He said last month that the digital currency was "a fraud" that would eventually blow up. Bitcoin mania is reminiscent of the tulip bulb craze in the 17th century, he said, stressing that he would not allow JP Morgan traders to trade it.
David Yermack, a professor of finance at New York University Stern School of Business, said cryptocurrencies can hardly be considered as real money as they don't do well as a unit of account, a medium of exchange, or a store of value -- three basic properties real money should have. Yermack said Bitcoin trading is "pure speculation" and anyone who invests in this is "buying an asset that is so new that no one really understands and is not really getting any of the regulatory protection that you would get in the stock markets or the commodities markets.
With no previous experience, governments have been struggling with regulations and laws on the trading of cryptocurrencies and other related activities. The Chinese government has already taken steps to protect the interests of investors, with authorities ordering a ban on initial coin offerings ICOs , a nascent form of fundraising in which technology start-ups issue their own digital coins, or "tokens," to investors to access funds as the rapidly expanding market spawned concerns about financial risks.
ICO activities were halted in China starting Sept. ICOs allowed companies to issue cryptocurrencies to investors in exchange for currencies with more liquid value such as Bitcoin, without the need to follow rules associated with traditional channels such as IPOs. Unlike IPOs, in which investors buy stocks in companies, investors in ICOs receive digital coins developed by the firms, which could appreciate in value if the companies fare well and the demand for their currencies grows.
He pointed out that there's no investment banker building a book of business, and the way in which customers interact with asset is totally different from having a broker on the stock market in an ICO. In a notice on Aug.
Securities and Exchange Commission warned investors of potential scams involving stocks of companies claiming a relationship or engagement with ICOs. Singapore and Sweden have been reaching out to academics and entrepreneurs, holding hearings and organizing conferences for regulation advice.
However, despite risks and concerns brought by cryptocurrencies, experts have seen an enormous potential of blockchain technology born with Bitcoin. Both financial and tech industries have been embracing the blockchain technology, and are excited at the possibilities it opened up and the potential new businesses that might be worth trillions of dollars, experts said. State Council holds reception to celebrate 68th anniversary of founding of PRC. China's Xi pays tribute to national heroes at Tian'anmen Square.
National flag-raising ceremony held at Tian'anmen Square. British Royal Air Force aerobatic team performs in Doha. Aerial view of Longji Terraces in south China's Guangxi. Large flower terrace gleams on Tian'anmen Square in Beijing.
Lanzhou-Chongqing railway to open to traffic on Sept. Cryptocurrency under increasing scrutiny as investment risk hikes Source: Animal abusers in Britain to face 5 years prison in get-tough policy.