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Dispelling the myths of Bitcoin
by FCNB on 

Dispelling the myths of Bitcoin

Bitcoin has gotten a lot of media attention in the last few months. You’d have been hard pressed not to see a story about its skyrocketing trading value as it got close to $20,000 USD.

Some people think that Bitcoin is the new “money” that will soon be the backbone of the world economy. We say “Not so fast.” Let’s take a step back and take a closer look.  If you’re thinking about investing in Bitcoin, or another cryptocurrency, read on before making your decision.

Money must be three things:

  1. A medium of exchange. Meaning you can use it to buy or sell products and services.  Before money, people exchanged goods and services for other goods and services.  (Remember when you tried to trade that apple in your lunch box for the chocolate bar your friend brought?  With money, trade is easier – you can just buy your own chocolate bar.)
  2. A store of value. Money should be able to be used to build up savings because its value stays relatively stable.  It must also have stable and largely predictable purchasing power. That means the money you have today will buy more or less the same amount of stuff tomorrow. Money works best if its value is slightly inflationary. When a currency is inflationary, it means that the dollar you have today will have less purchasing power in the future. A bit of inflation encourages people to spend their money and keeps the economy moving. This is part of what governments are doing when they adjust interest rates and the money supply. But Bitcoin is acting in a deflationary manner. Its value is increasing based mainly on people being very excited about it creating market hype and speculation. This encourages people to hold on to their Bitcoin – not spend them. 
  3. Accepted as a “unit of account.”  Money allows us to compare the value of products and services and express this value as a price. We can then compare costs of things and make financial decisions.

Bitcoin has only one of the properties listed above: it is a medium of exchange, but even still, it is not generally accepted as a form of payment in a lot of places. It doesn’t meet the other two requirements, mainly because its value is so unpredictable. And so Bitcoin is not being used as any sort of traditional currency. To be money or to be a real store of value, it must be stable.

It’s natural to be curious about Bitcoin as an investment opportunity. But if you’re like many New Brunswickers, you might not know the reasons to be cautious about it.

We can provide you with five.

1) Bitcoin does not solve an existing consumer problem
Most people do not use Bitcoin for making day-to-day payments. It is not more convenient or efficient to use Bitcoin to run your errands or make your purchases. It is not accepted in many places and the transactions are slow and expensive.

The bitcoin network can process between three to seven transactions per second (or TPS). Visa can process approximately 56,000 transactions per second. Besides the fact that transaction processing time is extremely slow compared to existing payment methods, this Bitcoin bottleneck is causing transaction fees to increase.

Beyond speculation, its only major advantage over existing payment methods is its purported anonymity.   Unfortunately, in many cases, this anonymity is being exploited and Bitcoin is being used for purchasing and financing illicit goods and services, like money laundering.  Bitcoin does not solve any specific consumer payment problem that is not already addressed by the existing financial system, or that could not be solved within that system with reasonable effort.

2) Bitcoin is more complicated to use
Even if Bitcoin did work as well as existing payment methods, you still have to learn a whole new set of rules and procedures for Bitcoin transactions. It’s just not worth it for most people to go through this extra trouble. 

You have to use digital wallet and exchange services for buying and selling cryptocurrencies. Not only can they be complicated to use, there are a lot of additional risks in storing your money in a digital wallet or exchange rather than in a regulated financial institution, like a bank or credit union.

Wallet or exchange providers can be hacked.  At the end of the day, you’re simply replacing a regulated insured intermediary (a bank), with an uninsured and in most cases unregulated one (the exchange or wallet provider).

3) Bitcoin deposits are not insured
When you deposit Canadian currency into an eligible account at a bank or credit union, your deposit is insured. This insurance is free and automatic. It protects you in the case of bank failure. Deposits at banks are insured federally by the Canada Deposit Insurance Corporation (CDIC).  Deposits at Credit Unions are insured provincially − in New Brunswick by the New Brunswick Credit Union Deposit Insurance Corporation (NBCUDIC).  If the bank or credit union fails, the insurance automatically pays out.

There is no insurance for Bitcoin or any other cryptocurrency. It is hard to imagine why the average consumer would give up this insurance, simply to keep their day-to-day money in a cryptocurrency.  If (or when) your digital wallet or the exchange is hacked, your personal information and your money is at risk. There is no payback from the wallet or exchange to recover what you lost. 

4) Bitcoin offers no customer service
Any day-to-day monetary system has to allow for human error, and provide a way to fix those errors. Think of the message at your bank when you pay a bill or transfer money to someone. Once you complete the transaction, you may be able to call the bank if you’ve made a mistake or want to cancel the transfer. If you sent your Bitcoin to the wrong or a nonexistent address, it is lost and you have no customer service to call.

5) Bitcoin isn’t regulated by anyone
Bitcoin operates outside of regulation, which makes it prone to all kinds of manipulation.  Investors should proceed with extreme caution when thinking about investing in Bitcoin or any cryptocurrency.  Be sure to speak with a registered investment professional before you make any investment decisions. You can check if an investment adviser is registered on the National Registration Search tool.

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Top Traps: Identity Fraud
by FCNB on 

Top Traps: Identity Fraud

Total New Brunswick complaints: 118Total New Brunswick victims: 100Total loss: $69,310 

Recognize it: Fraudsters use their victim’s personal information to steal from them by accessing the victim’s bank accounts or applying for credit in the victim’s name.

You may be a victim if you get a phone call about you’re a credit application, but you did not apply. Another red flag is if a collection agency informs you that they are collecting for a defaulted account in your name, but you never opened the account.

Protect yourself: Did you know, 47% of Canadians are not protecting themselves from identity theft?! These 4 easy habits can better protect your personal information.

  1. Change your online passwords regularly;
  2. Safely dispose  personal records;
  3. Be wary of unsolicited requests for personal or financial information.
  4. Check your credit report regularly with Canada’s two national credit bureaus, Equifax and TransUnion, to be sure you recognize the activity.

Your financial intuition and credit card provider may also offer features to help protect you against identity fraud. Take advantage of services like purchase notifications and two-way fraud alerts that allow customers to confirm transactions through their mobile device before they are processed.

Report it: If you suspect someone has been using your personal information to carry out fraudulent activities, contact your local police service. You should also report the fraud to your financial institution, credit card company, Equifax and TransUnion.

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Top Traps: Extortion
by FCNB on 

Top Traps: Extortion

Total New Brunswick complaints: 163Total New Brunswick victims: 12Total loss: $22,513

Recognize it: Victims are pressured into handing over their money to scam artists to avoid a penalty or get back something that was stolen. A popular version of this scam involves the scammer pretending to be from the Canada Revenue Agency (CRA) or other government departments. The scammer threatens to arrest or deport the victim if they do not immediately pay back taxes or fees. To reduce the chances someone may recognize the scam and warn the victim, scammers often request payment using a money transfer service (like Western Union), a cryptocurrency (such as Bitcoin) or a gift card (like an iTunes gift card).  If you receive this scam – take a moment to think critically.  Does it make sense for the Canada Revenue Agency to ask for Bitcoins?  If there’s still doubt - the CRA has stated they do not, and will not accept Bitcoin as payment

Businesses are also targeted by extortion scams. Often these scams use ransomware, a harmful computer program that holds a business’s data on a computer hostage. Scammers threaten to publish or block access to the data until the victim pays a fee.

Protect Yourself: Legitimate organizations like the CRA do not demand payment through money transfer services, gift cards or other payment methods that cannot be traced. If you receive this type of request, delete the email or text, or hang up the phone and contact the company directly if you have a concern.

Be cautious of free downloads, such as games, movies and software. Often these free downloads are Trojan Horses, harmful software that is disguised as a legitimate program.

Report it: Report extortion scams to your local police service.

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Top Traps: Phishing
by FCNB on 

Top Traps: Phishing

Total New Brunswick complaints: 185

Total New Brunswick victims: 76

Personal information stolen: The financial loss comes after the fact if the information is used.

Recognize it: Scam artists send phishing emails to trick you into sharing personal information, like your PIN, credit card numbers and passwords. These email messages are designed to look like they are being sent by a real organization, like a bank, government department, or online store.  They have links to fake web pages that look like the real sites. Often scammers will claim that your account has been hacked and you need to follow a link to change your password. But your account was never really in danger.  The link will take you to a fake website that captures your personal information.

Protect yourself: Don’t reply to the email or click on a link if you do not recognize the sender.  If you have business with the company, then contact the company directly and ask if they sent you the link.

Report it: Phishing emails should be reported through the Spam Reporting Centre

Learn more about protecting yourself and your loved ones from fraud:

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Make the most of your March break budget
by FCNB on 

Make the most of your March break budget

Are you a parent looking forward to spending the March break with your children – but dread the toll it will take on your wallet? You’re not alone. According to a 2017 poll by BDO Canada, 79 per cent of Canadian parents expect to drop an average of $597 on activities to entertain their children during the week. Many of them anticipate going into debt for it as well.

But it doesn’t have to be this way – or at least, not on this scale. By any measure, $597 can go a long way whether it pays for groceries or mortgage payments. There are lots of things you can consider doing to entertain your children for free!

We’ve come up with five ideas to help you fill the time.

  1. No matter where you are, there are bound to be local parks you can explore for free. Take the kids on a trail walk where they can spot wildlife, get some exercise and enjoy some fresh air.
  2. Look for local events that have no admission fee. Maybe there’s a cultural festival going on, or the library or museum is putting on an event where children can learn something new, or the local adventure club is hosting a free nature walk. Some shopping malls even put on free children’s entertainment, like magic shows and bouncy castles, to entice shoppers. Social media can be a great place to research these events. Use your imagination and maybe you’ll stumble upon a new family hobby!
  3. Some entertainment venues offer “kids play free” days. Think bowling alleys, swimming pools, or recreation centres.
  4. Volunteer! What better way to spend some family time than by giving back to the community? This is a great opportunity to get the kids thinking about the causes that matter to them and what they can do to help.
  5. Free skates. Most municipalities offer an hour of ice time several times a week at the local arena. Check their website or give their recreation depart ment a call to get times.

Have more ideas? Share them with us in the comments!

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