Digital Currency Vulnerable To Cybersecurity Attacks

King & Spalding

The Commodity Futures Trading Commission (“CFTC”) recently warned that “digital wallets” used to store virtual currency such as Bitcoin could be susceptible to cybersecurity attacks.  

The CFTC’s October 17, 2017 Primer on Virtual Currency highlights the potential cybersecurity risks associated with convertible virtual currencies. According to the report, virtual currency exchanges may have weak cybersecurity and related safeguards for customers. As such, the CFTC advises that digital wallets “may be vulnerable to hacks, resulting in the theft of virtual currency or loss of customer assets.”  The report additionally states that customers using virtual currency may be susceptible to other types of fraud such as Ponzi schemes, the likes of which have plagued traditional investors for years.

The report notes that Bitcoin currently makes up the largest amount of convertible virtual currency, with approximately $72 billion in market capitalization as of August 2017.

Relatedly, on September 7, 2017, Representative David Schweikert (R-AZ) introduced a virtual currency bill, H.R. 3708, that proposes to  amend the Internal Revenue Code of 1986 to “exclude from gross income de minimis gains from certain sales or exchanges of virtual currency, and for other purposes.”  That measure has been referred to the House Ways and Means Committee for consideration.

Despite the acknowledgement by some government agencies, Bitcoin and other virtual currencies continue to be viewed by some investors with skepticism. Regardless, consumers should be aware of the cybersecurity risks potentially associated with such currency.

Written by:

King & Spalding

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