Will cryptocurrencies ever make it into banking? With constant hacks, it seems cryptocurrencies are no closer to becoming a safe means of exchanging value or going mainstream. JP Morgan had plans to create a JP Morgan-backed cryptocurrency earlier this year. However, those headlines have all but faded away and there's been no word from the bank about any further plans to do something with cryptocurrencies. Are cryptocurrencies really so chaotic that no bank wants to touch them?
One problem banks have with cryptocurrencies is that they are unregulated. Unlike money, no one backs cryptocurrencies. They are also not FDIC insured. For consumers, cryptocurrencies present a number of risks. Every month, one or more exchanges get hacked. Exchanges websites are where people go to exchange cash for cryptocurrencies or one kind of cryptocurrency for cryptocurrency.
Two of the largest exchanges in the United States are Bittrex and Coinbase. Fortunately, neither has been hacked. Some exchanges have far better security practices than others. Unfortunately, you don't know how good anyone's security is until they've been hacked. This summer, Bitrue, a large Singaporean exchange, was the latest to fall victim, with around $5 million worth of customer cryptocurrencies being stolen. Bitrue tried to pass the hack off as website maintenance initially but eventually had to come clean about what really happened. It did say it was going to make whole customers who lost money.
Some of the worst offenders are peer-to-peer exchanges that allow consumers to meet directly and exchange cryptocurrencies. Consumers are often scammed out of money on these sites.
Unlike government-backed money, which allows you to exchange dollar bills at a bank for coins, a money order, or cashiers check, no bank will exchange your Bitcoin or any other cryptocurrency. It's still very early days for cryptocurrencies. Consumers wanting to try them out should only risk money they are willing to lose and should take as many precautions as possible to guard against exchange theft