Over the past several months, federal governments and central banks have issued warnings notifying consumers about the dangers and risks associated with investing in bitcoin. Now it seems there are states that are following the same route and publishing their own cryptocurrency notices.
According to a consumer and investor guidance (PDF) posted by the State of Nevada Department of Business & Industry, the Financial Institutions Division explained what virtual currencies are, listed the two most dominant cryptocurrencies (bitcoin and litecoin) and, in collaboration with the Conference of State Bank Supervisors (CSBS), through its Emerging Payments Task Force, and the North American Securities Administrators Association (NASAA), identified the hazards.
“This may affect investors as well as consumers using virtual currencies as a means of payment,” the statement reads. “Virtual currency volatility also may make securities offerings tied to these currencies unsuitable for most investors.”
On its list of warnings, the next was the matter of theft and losses. The state department cautioned that consumers could experience financial losses if an account is not secure and holdings in digital wallets are not insured against losses – there is no way to reverse bitcoin transactions.
It would then repeat the same concerns that other public officials have: they are affiliated with criminal activities.
“Like other forms of payment, virtual currencies and virtual currency exchanges have been used to fund illicit activities,” the department added. “Legitimate customers of virtual currencies may be unable to access accounts if an exchange is shut down as part of a criminal investigation or for any other reason.”
There aren’t too many laws and regulations pertaining to businesses involving themselves with bitcoin. With federal and state regulators still assessing bitcoins and their relevance to the overall economy, many merchants have just trekked on ahead using bitcoins for transactions. This could very well change in the near future as the Nevada government body noted that companies may or may not be regulated when dealing with virtual currencies.
Its final warning was in regards to taxation. It cited the recent IRS announcement that virtual currency would be treated as property.
“General tax principles applicable to property transactions apply to transactions using virtual currency,” the notice stated. “This includes determining the fair market value of virtual currency in U.S. dollars as of the date of payment or receipt, as well as any gain or loss incurred.”
In the end, the Silver State recommends all consumers to do their due diligence and necessary homework when it comes to digital currency exchanges, bitcoin ATMs, administrators and merchants.
Last week, the Missouri Secretary of State published an investor alert over bitcoin and listed the exact same kind of advice in it.
“It’s important to recognize that in many cases not even the supposed Bitcoin and digital currency experts know enough about the product to help you make a fully informed investment decision,” Missouri Secretary of State Jason Kander said in a statement. “It’s best to rely on only the most reputable sources of information and do your own due diligence before investing in potentially risky products.”
More states could soon be posting their own warnings about bitcoin and informing citizens about the common risks that unsuspecting and unknowing consumers and public officials have about the cryptocurrency industry.