If you don’t want to get sucked into a scam, subject your funds to cyber attack or lose value to currency fluctuation, the Connecticut Better Business Bureau warns you to be wary of bitcoin.
The bureau has released a warning to businesses, investors and consumers about using virtual currency. It warns virtual currency is subject to minimal regulation, is susceptible to cyber attacks and is not backed by any government. It warns that con artists are hawking investment swindles with it.
Hundreds of thousands of merchants, including major retailers, now accept bitcoin, the bureau notes in its press release. Bitcoin transactions enable anonymous payments globally that bypass waits and fees associated with international payments.
Insufficient Safeguards
Bitcoin, however, is not controlled by or backed by a government or a central bank, the bureau notes. In addition, the currency’s value fluctuates “wildly,” which the bureau claims makes it dangerous for merchants to accept and for consumers to invest in.
Howard Schwartz, the bureau’s executive communications director, claims the lack of regulation and consumer protection makes virtual currency risky.
The press release highlights the following risks for virtual currency:
• It is susceptible to cyber attacks and the lack of recourse should the currency disappear.
• Accounts are not insured by the Federal Deposit Insurance Corp. which insures bank deposits up to $250,000.
• Investments connected to virtual currency may be unsuitable for most investors on account of its volatility.
• Investors will rely on unregulated companies that may lack appropriate internal controls and could be more susceptible to fraud and theft compared to regulated financial institutions.
• Investors have to rely on the power of their own computer security capabilities and third-party security systems to protect virtual currency wallets from theft.
Scammers Prey On Virtual Currency
Virtual currency is subject to con artists seeking to exploit people with investment scams, the bureau claims.
To this point, it notes that the Securities and Exchange Commission took action against a man in Texas who advertised an investment opportunity in an online bitcoin forum. The man convinced people to send him bitcoin in exchange for receiving 7% in weekly interest in addition to other gains, but he was unable to fulfill his obligations.
The bureau advises people to “do your homework” before making any financial decisions. It encourages people to contact the bureau if complaints have been filed against investment promoters. It urges them to seek written information on an investment, including financial information about the company and the risks involved.
People are encouraged to seek help about an investment from someone they can trust such as an accountant or an attorney, and to be wary of investments that carry no risk.
Consumers are encouraged to report suspected fraud to the Connecticut department of banking (www.ct.gov/dob) or to the Better Business Bureau Scam Tracker (www.bbb.org/scamtracker/connecticut).