jump to home menu jump to vertical menu jump to content jump to footer

Consumer Alert:

03/18/2014

Consumer Alert: Virtual Currencies

 

 

For Immediate Release                                 
Wednesday, March 18, 2014
 
Contact: Jamie Mongiovi
(850) 410-9709
Consumer Alert: Virtual Currencies
The Florida Office of Financial Regulation raises awareness about the risks of purchasing, investing in, and exchanging virtual currencies
 
Tallahassee, Fla. – The Florida Office of Financial Regulation (OFR) warns consumers of the potential risks associated with purchasing, investing in, and exchanging virtual currencies, such as bitcoin. Members of the U.S. Congress, federal and state regulatory authorities, are continuing to question a way forward with respect to these diverse and decentralized payment mechanisms. Mt. Gox, an international Bitcoin exchange, filed for bankruptcy that resulted in losses in excess of $400 million and put a spotlight on risks surrounding virtual currencies.
 
One of the top priorities of the OFR is to keep Floridians informed about the dangers of the financial marketplace. The following facts should be carefully considered when dealing with virtual currencies.
 
• No insurance guarantee. Virtual currency is not guaranteed with protection, while funds held by U.S. banks and credit unions are insured.
• Unpredictability. The value of virtual currencies can rise and fall in a short time, and these values are driven by the marketplace. Those who deal in virtual currencies should realize the risks, which can result in substantial losses.
• Security. Some virtual currency exchanges that offer to store the consumers’ funds in virtual wallets have failed to protect them, resulting in consumer losses due to hacking of these virtual wallets. 
• Links to criminal activity. Criminals have taken advantage of the anonymity provided by virtual currencies, and have used them for money laundering and other crimes. If an exchange is shut down, consumers may not be able to access their funds.
• Regulation. Oversight of virtual currencies has not been thoroughly developed, and thus, consumers lack many of the protections they have come to expect within the financial services industry.
• Tax obligations. To view the Internal Revenue Service (IRS) guidance on the tax implications concerning virtual currencies, visit http://www.irs.gov/pub/irs-drop/n-14-21.pdf.  
 
# # #
 
The Florida Office of Financial Regulation provides regulatory oversight for Florida’s financial services providers. Our mission is to protect Floridians, promote a safe and sound financial marketplace, and contribute to the growth of Florida’s economy with smart, efficient and effective regulation of the financial services industry.
www.flofr.com