Las Vegas, NV- Due
to increased interest in virtual currency and other payment innovation which
has led to the rapid emergence of different types of currencies and payment
mechanisms, the Nevada Financial Institutions Division is issuing guidance for
consumers and investors. The information
is intended to educate consumers about virtual currency and risk factors
associated with transacting or investing in virtual currency.
Virtual currency is an electronic medium of exchange that does not have
all the attributes of real currencies.
Virtual currencies include cryptocurrencies, such as Bitcoin and
Litecoin, which are not legal tender and are not issued or backed by any
central bank or governmental authority. Virtual currencies have legitimate
purposes and can be purchased, sold, and exchanged with other types of virtual
currencies or real currencies, like the U.S. dollar. This can happen through various mechanisms
such as exchangers, administrators or merchants that are willing to accept
virtual currencies in lieu of real currency.
The following guidance was developed in coordination with the Conference
of State Bank Supervisors (CSBS), through its Emerging Payments Task Force, and
the North American Securities Administrators Association (NASAA).
What Should a Consumer Consider?
Prior to buying,
selling, transacting with, or investing in a virtual currency, consumers should
consider the following:
currencies are volatile in value. Virtual currencies are not backed by a
central bank and are highly volatile with the potential for complete loss of
value. This may affect investors as well
as consumers using virtual currencies as a means of payment. Virtual currency
volatility also may make securities offerings tied to these currencies
unsuitable for most investors.
currencies can be stolen or otherwise subject to loss. There is the
potential for consumers to incur financial losses if an account is not
maintained in a secure manner. Currently, most virtual accounts or “wallets” –
unlike funds held in U.S. banks or credit unions – are not insured against
loss. There is no way to reverse virtual
currencies have been connected to criminal activities. Like other forms
of payment, virtual currencies and virtual currency exchanges have been used to
fund illicit activities. 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.
currencies and companies dealing in virtual currencies may or may not be
transactions may be taxable. For federal tax purposes, the IRS has
announced that virtual currency is treated as property. General tax principles
applicable to property transactions apply to transactions using virtual
currency. 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. For more information, go
Consumers considering the use of virtual currencies should research any
company offering services related to virtual currencies. This includes exchanges, platforms,
administrators, sellers, or ATMs. There
are a variety of sources of information available:
About NFID. The Nevada Financial Institutions Division, a
division of the Department of Business and Industry is mandated to maintain a
financial institutions system for the citizens of Nevada that is safe and
sound, protects consumers and defends the overall public interest. The
Division also promotes economic development through the efficient, effective
and equitable licensing, examination and supervision of depository, fiduciary,
and non-depository financial institutions.
The Conference of State Bank Supervisors (CSBS) is the nationwide
organization of banking regulators from all 50 states, the District of
Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands. In February 2014,
CSBS launched its Emerging Payments Task Force to take a comprehensive look at
the changing payments landscape. The
Task Force seeks to identify opportunities for a coordinated state approach to
payments issues as well as promote compliance, security and protection for
About NASAA. The
North American Securities Administrators Association (NASAA) is the oldest
international organization devoted to investor protection. NASAA’s membership
consists of 67 state, provincial, and territorial securities administrators in
the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands,
Canada, and Mexico. In the United States, NASAA is the voice of state
securities agencies responsible for efficient capital formation and grass-roots
investor protection. For more information, visit www.nasaa.org.
# # #
 Convertible virtual currency is virtual currency
that either has an equivalent value in real currency or acts as a substitute
for real currency. The FinCEN guidance can be located here: http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html.