By Edward Cardenas
LANSING (CBS Detroit) – Michigan Attorney General Bill Schuette released an advisory Monday reminding residents to research virtual currencies such as Bitcoin or Litecoin, and understand there are risks with these payments.
“Virtual currency does not have the same safeguards as hard currency,” Schuette said in a release. “I advise all Michigan citizens to educate themselves prior to putting their hard-earned dollars into a virtual wallet.”
These virtual currencies are not issued or backed by the United States or other governments, according to the attorney general’s office, and are unregulated and uninsured.
Currencies such as Bitcoin and Litecoin 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, the attorney general’s office stated.
The virtual currencies can be exchanged for items and services.
Schuette’s office shared the following recommendations for residents to consider before investing in virtual currencies:
- 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.
Michigan residents can find additional information about virtual currency is available at the Michigan Department of Financial Services webpage.