Chesco Business Today has reported about virtual currencies, and we should also report the Pennsylvania Department of Banking and Securities has just issued an advisory urging consumers, businesses and investors to consider the risks of using or investing in virtual currencies.

Cryptocurrencies such as bitcoin and litecoin are an electronic medium of exchange. Virtual currencies can be purchased, sold and exchanged with other types of virtual currencies or real currencies, like the U.S. dollar. This happens through various mechanisms such as exchangers, administrators or merchants that are willing to accept virtual currencies in lieu of real currency.

“These virtual currencies – unlike U.S. dollars – are not backed by tangible assets or the full faith and credit of the U.S. government, and currently are subject to little or no regulation in any country,” said Glenn E. Moyer, secretary of Banking and Securities.

“In addition, we have seen that the value of virtual currencies is highly volatile and the very concepts underlying these currencies are still being debated by financial and legal experts,” he said.

The Internal Revenue Service has declared that virtual currency will be treated as property and not as currency, and transactions therefore may be subject to certain taxes under IRS code. Virtual currencies can be stolen or otherwise subject to cybercrime. Also, virtual currency accounts are not insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration, which insure bank and credit union deposit accounts up to $250,000.

The advisory was issued in conjunction with the Conference of State Bank Supervisors and the North American Securities Administrators Association. More information about virtual currencies may be found on their respective websites,www.csbs.org and www.nasaa.org.

Consumers and investors can make inquiries or file a complaint against any company or individual regulated or licensed by the Department of Banking and Securities online (www.dobs.state.pa.us) or by calling 1-800-PA-BANKS (800-722-2657).

Links: www.csbs.org and www.dobs.state.pa.us