Cryptocurrency has been gaining popularity in recent years and it experienced a surge in media attention mid-October 2021 as the first fund traded on the stock exchange linked to bitcoin came on the market.
Cryptocurrency is a term used to describe all types of digital currency. There are thousands of cryptocurrencies including the first and most popular: bitcoin. Bitcoin is a decentralized digital currency, which means it operates without the need for a financial institution. While it may be used like cash to purchase goods and services in limited places, it’s commonly purchased (or traded as said in the bitcoin world) as an investment. New bitcoins are created by a process called mining, which is done by supercomputers, not the average person.
It’s important to understand some risks associated with bitcoin and cryptocurrencies:
Cryptocurrency is not backed by the government, and it’s not insured.
Additionally, legislation to establish proper oversight has not been adopted by Congress. These are important reasons why Michigan Schools and Government Credit Union has not offered cryptocurrency products for our members, as we currently believe the risk is greater than the reward for our members. MSGCU is insured by the National Credit Union Administration (NCUA), which means that your money is safe. Funds up to $250,000 are insured by NCUA.
You can be out of luck when something goes wrong.
Not being insured also means you can be out of luck should your digital wallet get hacked or if you store your cryptocurrency with a third party that goes out of business. On the other hand, if your MSGCU debit card is stolen or number is compromised, there is zero liability for you. As a reminder, never share your online account password and always be on the lookout for fraudsters trying to take advantage of you (see scam alerts from MSGCU). MSGCU will never ask for your online banking username, password, or log-in verification code.
Cryptocurrency is considered volatile and high risk.
High-risk investments also come with emotional, and fiscal, highs and lows. If risky investments don't match your comfort level, consider a more conservative and insured option like a certificate of deposit.
It’s not recognized as legal tender in the US.
Not recognized as legal tender means it may be difficult to use cryptocurrency to pay for goods and services. Whether you want to pay by phone, swipe your card at the store, send money securely to friends or family, or use cold hard cash, your MSGCU accounts support your preference.
Financial advice is mostly digital when it comes to cryptocurrency.
While many thrive in an all-digital approach when it comes to financial advice, not everyone is comfortable with it and prefer a personal relationship when it comes to finances. MSGCU supports our members with many different types of financial education, from articles like this to one-on-one support.
We at Michigan Schools and Government Credit Union do not currently offer cryptocurrency products or services for members at this time. While we don’t offer cryptocurrency products today, we will continue to monitor the evolution of digital currency.
Sources:
https://www.forbes.com/advisor/investing/what-is-bitcoin/
https://www.consumer.ftc.gov/articles/what-know-about-cryptocurrency-and-scams
https://www.wsj.com/articles/crypto-ceos-to-testify-before-lawmakers-weighing-greater-regulation-11638959403
Category: Security
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