Beware of Bitcoin, US consumer agency warns

[Omaha Steve]

Source: PC World

By Grant Gross

Bitcoin and other virtual currencies can expose users to a number of risks, including hackers and scammers trying to take advantage of hype surrounding the technology, a U.S. consumer protection agency warned Monday.

Bitcoin and other popular virtual currencies such as XPR and Dogecoin offer fewer consumer protections than traditional banks or credit card providers, the U.S. Consumer Financial Protection Bureau (CFPB) said in a consumer advisory. The six-page document appears to be aimed largely at new users of virtual currencies, and it includes an explanation of virtual currencies and an advisory on how to buy them.

“Virtual currencies may have potential benefits, but consumers need to be cautious and they need to be asking the right questions,” CFPB Director Richard Cordray said in a statement. “Virtual currencies are not backed by any government or central bank, and at this point consumers are stepping into the Wild West when they engage in the market.”

Virtual currencies offer the potential for innovation, but “a lot of big issues have yet to be addressed,” the CFPB’s advisory said.

FULL story at link.

More on Bitcoin: How the virtual currency can go mainstream: http://www.techhive.com/article/2158667/how-bitcoin-can-go-mainstream.html





Read more: http://www.pcworld.com/article/2463780/us-consumer-agency-warns-of-several-bitcoin-risks.html

[LynneSin]

1. I'd rather invest in the Sarah Palin Channel then in Bitcoins

Already there have been stories of hacking and Bitcoin exchanges going bankrupt. I know about 9-10 years ago when my credit cards were stolen I had the charges cleared within days. Does Bitcoin provide that same kind of protection if my bitcoin account was hacked and I lost money?

To me Bitcoins seem like a pyramid scheme. I know there are people, including some DUers, that have made money off of bitcoins. But I think the only people really making any money are those who were in it first. Latecomers may not have the same kind of returns.

[bhikkhu]

2. Currency itself isn't an investment

any value to bitcoin should be in its utility as a currency, not as a scheme to make money. It has some utility, especially if you need to transfer funds from one country and from one currency to another, or for international purchases. In that respect its far easier and cheaper than other means. Other than those, its not much good and hasn't got the protections paypal and visa and so forth have.

[eggplant]

3. Currency is absolutely an investment.

That's why people, companies, and governments trade in things like bonds and debt. It's value lies in its scarcity and how easily tradable it is.

As to whether currency *should* be used for that purpose, it doesn't really matter. It is, and there is no way to stop it.

[bhikkhu]

4. Currency is a proxy for goods, resources and labor

In itself, its not an investment. It can be used as an investment, and now and then one can make money trading currencies, but in itself it produces nothing. Its value is in its utility to trade, and in the various protections and guarantees that are available protecting that trade.

[eggplant]

5. I'm not clear what the difference is...

...between "it is an investment" and "it can be used as an investment". Money produces all sorts of value. Without it, people couldn't borrow or invest in business ventures. Personally, I think of that as producing something.

People also collect it: http://www.usmint.gov/collectorsclub/index.cfm?action=Collecting

So if we are going to be pedantic, it is a product in and of itself.

[bhikkhu]

6. If you think of what value is you may think in terms of currency

but currency is only a proxy for the tangible products and services it can be exchanged for. It has no value in itself, only in what it can be exchanged for. Its easy not to think about it too much, but if you want, you might imagine a how world without currency (which was the case for most of human history) would work. I suppose it would be lengthy explanation and argument though, and essentially inconsequential. Another time perhaps.

[eggplant]

8. Just because I don't agree with you doesn't mean I didn't understand you.

But thank you for your patronage.

[Adrahil]

13. Hmmmm.... I think there's a debate here....

IMO, currency is just a valueless commodity that takes on value as a proxy for goods and services. But because it is a PROXY, it is still a commodity.... an investment. It's value can increase or decrease based on people's perception of it's rarity, security, and acceptance.

Bitcoin really is little more than a commodity right now since it is so volatile that few people treat it as a proxy for goods a services. And the fact that it is a fixed supply "currency" means that it will tend to encourage hoarding, decreasing its utility as a "currency" even more.

In my view, it's a pyramid scheme.

[Psephos]

7. Who could have expected that?

The US government is warning us about an alternative to the Monopoly money they print by the billions every day?

Knock me over with a feather....

[closeupready]

10. lol, yup, that's pretty much all you need to know.

In a nutshell.

[mwooldri]

9. What part of "experimental" don't people get?

All crypocurrencies - bitcoin, litecoin, dogecoin, etc... are experimental and should be used with the understanding that there is risk.

[closeupready]

12. Agreed. For many users, an e-coin's value lies in the ability to

liquify established currencies into a more unregulated form - and back again - which can be used for legitimate purposes but (unlike established currencies) also for purposes frowned on or even prohibited by authorities.

That is, many users don't give a diddly squat about e-coins as an investment - they care only whether e-coins can help them get from point A to point B.

[Orsino]

11. As opposed to the dollar, which is never hacked or scammed. n/t