Condo Media - August 2021 - 16

Asked & Answered
What to Know About
Cryptocurrency
Should our association buy Bitcoin*
with a portion of our reserve funds as
an investment since we can't get a decent
interest rate on our reserves?
*Bitcoin is the name of the best-known cryptocurrency.
*Bitcoin is the name of the best-known cryptocurrency.
Community Associations should maintain adequate
funding to meet fi nancial obligations-that's stating
the obvious-but some boards are considering
converting the money in traditional bank accounts
to cryptocurrency.
converting the money in traditional bank accounts
The Federal Trade Commission defi nes cryptocurThe
Federal Trade Commission defi nes cryptocurrency
as digital money with no physical presence such
as bills or coins. Cryptocurrencies are not insured by
a government, meaning that deposits stored online
do not have the same protections as money in a bank
account. If funds are lost, associations will have no
way to recover them, says Joel W. Meskin, CIRMS,
managing director of community association products
at McGowan Program Administrators in Fairview
Park, Ohio.
Fidelity/crime insurance typically covers employee
dishonesty or theft, forgery and alteration, premises
coverage, and wire transfer fraud. Protections don't
extend to cryptocurrency. " This coverage broadly
protects the association when securities are stolen
by an association employee, " he explains.
Additionally, fi delity/crime insurance only covers
association employees-not homeowners, explains
Meskin, a fellow in CAI's College of Community
Association Lawyers.
" Associations are nonprofi t entities, so their funds
belong to the association legal entity, not the individual
unit owners, " he says. " Unit owners are not
deemed as 'insureds' under the fi delity/crime policy
and would have no right to any funds recovered from
losses covered under the policy. "
The board's obligation is to protect the association,
including their liquid assets. Meskin echoes the FTC
and warns that cryptocurrency is not backed by any
16 CONDOMEDIA August 2021
third party, including the U.S. government. " This
means these funds are unregulated, unstable, and uninsured.
They know it is not a safe or common instrument
used in community associations, " says Meskin.
Likewise, cryptocurrency adds an unnecessary
layer of confusion to association fi nances. Boards need
to communicate their fi nancials to all homeowners.
With stakeholders of various ages and technological
knowledge, cryptocurrency can be too complicated,
according to Meskin.
Until cryptocurrency has security behind it, Meskin
urges associations to avoid it. " The only time I see the
use of cryptocurrency is in demands from ransomware
hackers or other scams, " he says. " That is not to say
that, sometime in the future, this might become a
normalized product and contain the same security
to protect [association funds]. "
For boards considering alternative funds, Meskin
suggests asking the professionals. " They should
[follow the] advice of their community association
accountant, their community association lawyer,
as well as community association bankers, " he says.
■ THIS ANSWER WAS PROVIDED BY LEIGH NORMAN,
CAI'S MARKETING COMMUNICATIONS ASSOCIATE.
Reprinted with permission from the March/April 2021 issue
of Community Manager, a bimonthly newsletter published by
Community Associations Institute (CAI).
©
Community Associations Institute. Further reproduction
and distribution is prohibited without written consent.
Condo Media - August 2021

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