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Georgia Secretary of State Warns Investors to be Cautious with Virtual Currencies


 Atlanta, GA - May 21, 2014 

Georgia Secretary of State and Securities Commissioner Brian P. Kemp is cautioning Georgians to consider and appreciate the risks if they intend to invest in, or otherwise use, virtual currencies.  Virtual currencies include digital or crypto-currencies such as Bitcoin.

Virtual currency is an electronic medium of exchange that, unlike real money, is not controlled or backed by a central government or central bank. These currencies can be bought or sold through virtual currency exchanges, used to purchase goods or services where accepted, and are stored in an electronic wallet, also known as an “e-Wallet.” An e-Wallet is a digital system that allows payments online via a computer or mobile device such as a smartphone.

Georgia businesses, consumers, and investors should consider all of the following risks, and more, before active involvement with virtual currencies:

  • Virtual currency is subject to minimal regulation, susceptible to cyber-attacks, and there may be no recourse should the virtual currency disappear.
  • Virtual currency accounts are not insured by the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits up to $250,000.
  • Investments tied to virtual currency may be unsuitable for most investors due to their volatility.
  • Investors in virtual currency will be highly reliant upon unregulated companies that may lack appropriate internal controls and may be more susceptible to fraud and theft than regulated financial institutions.
  • Investors will have to rely upon the strength of their own computer security systems, as well as security systems provided by third parties, to protect their e-Wallets from theft.
  • Virtual currencies have, in some cases, been connected to criminal activities.
  • The Internal Revenue Service (IRS) has declared that virtual currency will be treated as property and not as currency, and transactions therefore may be subject to certain taxes under the IRS code.

This advisory has been issued in conjunction with the North American Securities Administrators Association (NASAA). NASAA’s full alert, which provides a more comprehensive discussion of virtual currencies and contains numerous links to useful resources, can be found here

The U.S. Securities and Exchange Commission's Office of Investor Education and Advocacy has also issued an alert regarding virtual currencies, and the use of them in the context of Ponzi schemes. The SEC's alert can be found here.

Businesses, consumers, and investors can file a complaint against any company or individual regulated by the Georgia Secretary of State Securities Division online.

Contact

214 State Capitol
Atlanta, Georgia 30334
404.656.2881
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© 2012 Georgia Secretary of State