Michigan Attorney General Bill Schuette’s office has released a broad advisory on digital currencies, stating they carry “real-life risk” and urging consumers to learn more about bitcoin and other currencies before purchasing or using them.
The advisory echoes similar releases by other state agencies, many of which have been published in the last six months. Warnings cover price volatility, tax considerations and the broader digital risks that consumers face when spending on the Internet.
In a statement, Schuette suggested that digital currencies need to be treated carefully by the uninformed, stressing that education is a key step for any investor or consumer wishing to get involved with bitcoin.
“Virtual currency does not have the same safeguards as hard currency. I advise all Michigan citizens to educate themselves prior to putting their hard-earned dollars into a virtual wallet.”
Treat ‘as an investment’
The notice states that, in the eyes of the Michigan attorney general’s office, bitcoin is not a “real currency”, and as such, buyers and sellers should treat digital currencies as a type of investment.
Part of this, the advisory explains, means taking the proper steps to protect digital currency holdings owing to the risk of malware that can lead to loss and theft. As well, the attorney general’s office said that consumers should not purchase more than they are willing to lose owing to the risk of price volatility.
The notice warns:
“Before purchasing any virtual currency or otherwise jumping on the virtual currency bandwagon, educate yourself so you can make an informed decision about what you are getting into. Virtual currency carries a significant amount of real-life risk.”
Stance mirrors prior US government warnings
In the past few months, regulators on the state and federal level in the US have issued warnings on bitcoin. The release from the Michigan attorney general’s office reflects many of the same concerns previously voiced, further confirming the near-term approach the US government is taking in regards to digital currencies.
In May, the Securities and Exchange Commission warned investors that quick price movements and a lack of centralized consumer protections puts digital currency users at risk. At the time, the agency said that like all technological innovations still in their relative infancy, bitcoin has “the potential to give rise both to frauds and high-risk investment opportunities”.
While mirroring past statements, the Michigan report also reflects on where US government policy in regards to digital currencies is heading in the long-term.
Last month, the Government Accountability Office (GAO) asked a series of federal regulators to take a more active approach toward bitcoin and other digital currencies. Specifically, the GAO requested that more interagency cooperation on digital currencies be conducted. The Consumer Financial Protection Bureau later responded by saying that such efforts were underway and that future advisories on bitcoin would be developed in conjunction with other parts of the federal government.