In an effort to warn the public about the risks associated with virtual currencies, USA.gov published a list of Five Things You Should Know About Virtual Currencies.
The article aims to simplify what virtual currencies are all about and why people should think about the risks involved before choosing to invest in it. It defines virtual currencies as a digital form of money that can be used for purchasing goods and services typically online and can also be exchanged for other currencies such as the U.S. dollar.
Risks of Virtual Currencies
The article also warned that these types of currencies have a high potential of attracting fraudulent activity and offer high-risk investment opportunities. Among the risks involved are the high risk of fraud, as scammers target virtual currency investors with promises of high returns, fake opportunities, and other schemes.
Apart from that, the article also mentions that virtual currencies are unregulated. “There are no laws in place to protect investors. The currencies, issuers, and exchanges are not regulated by any government. In addition, the funds are not insured from loss if the exchange shuts down or if the value plummets,” it noted.
In addition, virtual currencies are also known to fluctuate in value. The article mentions that the values can change dramatically in one day. It also shares that there are security concerns when it comes to digital currencies since exchanges may stop operating or permanently shut down as a result of fraud, technical glitches, hackers, or malware. It also added that virtual currencies also may be stolen by hackers.
Lastly, the article noted that the IRS treats virtual currencies as property, which means that general tax principles that apply to property transactions apply to transactions using virtual currency. It shared several contact information and links to government agencies that can be of help if any issues arise with transacting using virtual currencies.