What to know about cryptocurrencies?
Cryptocurrency, also called virtual currency or cryptocurrency, is digital money. That means there are no physical coins or bills — everything is online. You can transfer a cryptocurrency to someone on the internet without an intermediary, such as a bank. The most well-known cryptocurrencies are Bitcoin and Ether, but new cryptocurrencies continue to be created.
People could use cryptocurrencies to make quick payments and to avoid transaction fees. Some people might acquire cryptocurrencies as an investment, hoping that it will increase in value. Crypto-currencies can be purchased with a credit card or, in some cases, through a process called "mining." Cryptocurrencies are stored in a digital wallet or wallet, either online, on your computer or on another physical medium.
Before you buy a cryptocurrency, you have to know that it doesn't have the same protections as when you use US dollars. You also need to know that scammers are asking people to pay you with a cryptocurrency because they know that those payments are usually irreversible.
Cryptocurrencies versus US Dollars
The fact that cryptocurrencies are digital is not the only major difference between cryptocurrencies and traditional currencies such as US dollars.
Cryptocurrencies are not backed by a government.
Cryptocurrencies are not insured by the government as are bank deposits in the US. That means crypto-currencies stored online don't have the same protections that money deposited in a bank account has. If you store a cryptocurrency in a wallet or digital wallet provided by a company, and the company ceases operations or suffers a computer attack, the government may not be able to act and help you recover the money as it could with the money that is kept in banks or credit unions.
The value of a crypto-currency is constantly changing.
The value of a cryptocurrency can change every hour. An investment that today can be worth thousands of dollars tomorrow could be worth only hundreds of dollars. If the value goes down, there is no guarantee that it will go back up.
Are you about to invest in cryptocurrencies?
As with any other investment, before investing in a cryptocurrency, know what the risks are and learn how to spot a scam. Below is a list of some of the things to watch out for when considering your options.
No one can guarantee that you will make money.
Anyone who promises you a guaranteed yield or dividend is likely to be a scammer. Just because an investment is well-known or endorsed by a celebrity doesn't mean it's a good or safe thing. That applies to both cryptocurrencies and more traditional investments. Don't invest money you can't afford to lose.
Not all cryptocurrencies — or companies that promote crypto-currencies — are created equal.
Look at the statements being made by companies that are promoting cryptocurrencies. Search the internet by entering the name of the company and the cryptocurrency and add words like "review", "scam" or "complaint", if you do the search in Spanish, add words like "comentario", "estafa" or "queja".
How to pay with a cryptocurrency
If you are thinking about using a cryptocurrency to make a payment, know that there are important differences between paying with a crypto-currency and paying with traditional methods.
When you pay with a cryptocurrency, you don't have the same legal protections.
If something goes wrong, credit cards and debit cards have legal protections. For example, if you have to dispute a purchase, your credit card company has a process in place to help you get your money back. Usually, payments with cryptocurrencies are irreversible. Once you pay with a cryptocurrency, you can only get your money back if the seller sends it back to you.
Before buying something with a cryptocurrency, find out the reputation and address of the seller and how to contact him if a problem arises.
Refunds may not be in cryptocurrency.
If you are offered refunds, find out if they will be in cryptocurrency, US dollars, or another type of currency. And what will be the amount of your refund? The value of a cryptocurrency is constantly changing. Before you buy anything, find out how the seller calculates refunds.
Some of the information is likely to be public.
Although transactions with cryptocurrencies are anonymous, transactions can be published in a public accounting record, such as a Bitcoin blockchain. A blockchain is a public list of records that shows when someone makes a transaction with cryptocurrencies. Depending on the crypto-currency, the information added to the blockchain may include data such as the transaction amount. The information may also include the addresses of the sender's and receiver's wallet or wallet — a long string of numbers and letters linked to a wallet or digital wallet that stores cryptocurrencies. Both data, the amount of the transaction and the addresses of the wallet or wallet could be used to identify the people who are using it.
Cryptocurrency scams
As more people are interested in cryptocurrencies, scammers are finding more ways to use them. For example, scammers could offer investments and business "opportunities" by promising to double your investment or give you financial freedom.
Beware of anyone who:
- Guarantee that you will make money.
- Promise you high returns that will double your money in a short period of time.
- Promise you money in exchange for nothing in dollars or cryptocurrency.
- Make confusing statements about your company.
Cryptopirateo
Cryptopiration is when scammers use the processor power of your computer or smartphone to "mine" crypto-coins for their own benefit and without your permission. Just by visiting a scammer website, they can put malicious code on your device. With that, they can then access your device's processor on their own without you noticing.
If you notice that your device is running slower than normal, consumes your battery capacity quickly, or collapses, your device may have been hacked. Do the following:
- Close sites or apps that slow down your device or drain its battery.
- Use antivirus software, configure software and applications to update automatically, and never install a program or application that you don't find reliable.
- Don't click on any links without knowing where it's directing you and be careful about visiting unknown websites.
- Consider installing a browser extension or ad blocker that can help you defend against crypto-hacking. But first, do some research. Read reviews and consult trusted sources before installing any tools available online. Some websites may prevent you from using their site if you have a software blocker installed.
Report scams
Report fraud and other suspicious activity involving cryptocurrencies, or other digital assets to:
- The FTC in ftc.gov/queja.
- The Commodity Futures Trading Commission (CFTC) by calling 866-366-2382 or CFTC.gov/TipOrComplaint.
- The U.S. Securities and Exchange Commission (SEC) available in sec.gov/tcr.