Schuette Encourages Michigan Citizens To Understand Risks Before Purchasing Virtual CurrencyContact: Joy Yearout 517-373-8060
July 7, 2014
LANSING- Attorney General Bill Schuette today advised Michigan citizens to consider all the risks before purchasing any virtual currency so they may make an informed decision.
"Virtual currency does not have the same safeguards as hard currency," said Schuette. "I advise all Michigan citizens to educate themselves prior to putting their hard-earned dollars into a virtual wallet."
"Virtual" or "digital" currency, such as Bitcoin and Litecoin, is not issued or backed by the United States or any other government. It is also unregulated and uninsured, which means that consumers and businesses alike have limited recourse if they have a problem. Unlike the dollar, which is legal tender, no one is required to accept virtual currency as a form of payment.
While not tangible currency, virtual currency is bought by transferring real money through an exchange or to an individual, and is stored on computers or held by the purchaser or a third party in a so-called virtual wallet. If the marketplace perceives that it has value, virtual currency can be transmitted and exchanged in lieu of hard currency for goods and services. It can also be exchanged for hard currency.
Consider the following before investing in virtual currency exchanges:
Virtual Currency Can Be Lost or Stolen. Bitcoins are like cash – if they are lost or stolen, they are gone for good. If your virtual wallet is hacked, your bitcoin can be stolen. Unlike a bank account, virtual currency wallets are not insured against loss by a bank or government.
The Value is Volatile. Given the nature of virtual currency, value fluctuations can happen quickly and without warning. This rapid fluctuation means it is a high risk investment for consumers.
Tax Implications. The IRS has announced that virtual currency is not actual currency and is instead treated as property for U.S. federal tax purposes.
No Consumer Protections. At this time, virtual currency is not regulated by any government agency.
Because it is not hard currency, virtual currency should be treated like an investment. As with any investment decision, you should thoroughly research virtual currency before investing your hard-earned money.
The Attorney General's complete consumer alert is available online at: http://www.michigan.gov/ag/0,4534,7-164-17337_20942-332337--,00.html.
Investors should also check with the Michigan Department of Licensing and Regulatory Affairs – Bureau of Corporations, Securities & Commercial Licensing for information about investments involving virtual currency, http://www.michigan.gov/lara/0,4601,7-154-35299_61343---,00.html.
Additional information regarding virtual currency is available at the Michigan Department of Insurance and Financial Services webpage, www.michigan.gov/difs.