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State regulators warn consumers about virtual currency

Lorraine Mirabella

1:43 PM EDT, April 29, 2014

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State officials are warning consumers to pay attention to their e-wallets.

Virtual currency such as Bitcoin is becoming more popular but is largely unregulated, and it comes without federally backed insurance. The warning from Maryland's attorney general and financial regulation commissioner reminded consumers and investors to be cautious when dealing with digital and crypto-currency.

"It pays to know what’s in your e-Wallet and the many ways your money can disappear if you’re not careful," Attorney General Douglas F. Gansler said in today's announcement with Mark Kaufman, commissioner of financial regulation at the state Department of Labor, Licensing and Regulation. "Unlike the dollar, these highly volatile alternatives are not issued by a government authority and are typically not backed by tangible assets."

More and more merchants, businesses and other groups now accept Bitcoin, in lieu of traditional currency.

The entities that accept, transmit or exchange virtual currencies for U.S. dollars are subject to federal and sometimes state laws, such as being licensed as a money transmitter. But the state does not regulate virtual currencies, Kaufman said.

"I encourage any Maryland resident interested in virtual currencies to do their homework first," he said.

Virtual currency is an electronic medium that can be bought or sold through virtual currency exchanges and used to purchase goods or services. The currencies are kept in an electronic wallet, or e-wallet, a digital system that allows online payments. One Bitcoin exchange, MtGox, shut down after losing more than $350 million of virtual currency in a hacker scam.

Consumer advice on the currency is available on websites for the state labor department and AG's office.

lorraine.mirabella@baltsun.com