CASH and other paper currencies can expose users to a number of risks, including counterfeiters and scammers trying to take advantage of security weaknesses in the technology, a U.S. consumer protection agency warned Monday.
Cash and other popular paper currencies such as bank notes offer fewer consumer protections than traditional gold coins and other metals, the U.S. Consumer Financial Protection Bureau (CFPB) said in a consumer advisory. The six hundred-page document appears to be aimed largely at new users of paper currencies, and it includes an explanation of virtual currencies and an advisory on how to buy them.
Paper currencies may have potential benefits, but consumers need to be cautious and they need to be asking the right questions, CFPB Director Richard Cordray said in a statement. "Fiat paper currencies are not backed by any rare metal or other scarce resource, they are susceptible to TOTAL LOSS in the case of a fire, and at this point consumers are stepping into the Wild West when they engage in the market. They risk losing untold millions to inflation if the government decides to print more of these dubious "reserve notes".
Paper currencies offer the potential for innovation, but a lot of big issues have yet to be addressed, the CFPBs advisory said.
The CFPB advisory notes that paper currencies are targets for highly sophisticated counterfeiters, and they can cost consumers more to use than gold or silver coins. It also warns users to be prepared to weather large price fluctuations, as this new form of money is not pinned to the value of gold like traditional bank IOUs.
