Michigan AG Warns Residents of Risks with Virtual Currency
Michigan Attorney General Bill Schuette is warning Michiganders to consider all the risks before purchasing any type of virtual currency.
In a news release, Schuette said "virtual currency does not have the same safeguards as hard currency. 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's also unregulated and uninsured which means consumers and businesses have little recourse if a problem arises. Virtual or digital currency can be bought by transferring real money through an exchange or individual and is stored on a computer in a so called virtual wallet.
The Attorney General's office says 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 a virtual wallet is hacked, your bitcoin can be stolen. Unlike bank accounts, virtual wallets are not insured against loss by the bank or government.
- The value is volatile. Given the nature of virtual currency, value fluctuations can happen quickly and without warning. The rapid fluctuation makes it a high risk.
- Tax implications. The IRS has announced that virtual currency is not actual currency, however it will be treated as property for U.S. tax purposes.
- No consumer protections. At this time, virtual currency is not regulated by any government agency.
The Attorney General's office says as with any investment decision, you should thoroughly research virtual currency before investing in it. The Attorney General's complete consumer alert can be found here.