CFPB director likens virtual currencies to "Wild West'
- Published: Aug 14, 2014, 11 AM
Virtual currencies have been put on notice by a federal agency that advocates on behalf of U.S. consumers.
The Consumer Financial Protection Bureau released a consumer advisory this month that warns consumers about the risks of Bitcoin and other so-called crypto currencies that are not regulated or backed by any government.
In the advisory, the CFPB highlights four potential risks related to virtual currencies:
- Hackers: "Virtual currencies are targets for highly sophisticated hackers, who have been able to breach advanced security systems.”
- Fewer protections: "If you trust someone else to hold your virtual currencies and something goes wrong, that company may not offer you the kind of help you expect from a bank or debit or credit card provider."
- Cost: "Virtual currencies can cost consumers much more to use than credit cards or even regular cash.”
- Scams: "Fraudsters are taking advantage of the hype surrounding virtual currencies to cheat people with fake opportunities."
Read the entire CFPB consumer advisory online.
“Virtual 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 news release posted online. “Virtual currencies are not backed by any government or central bank, and at this point consumers are stepping into the Wild West when they engage in the market.”
The CFPB, which was created out of the Dodd-Frank Act of 2010 and proclaims its mission is to "make markets for consumer financial products and services work for Americans," is now accepting complaints from consumers about virtual currencies.
"Importantly, the CFPB will use all complaints to better understand the virtual currency market and its effect on consumers,” the online release states. "The CFPB will also use the complaints to help enforce federal consumer financial laws and, if appropriate, take consumer protection policy steps.”
Complaints can be submitted online.
Nancy Scola wrote of the CFPB’s advisory on The Washington Post’s technology blog, The Switch:
It's not an altogether surprising move; as the CFPB is pushing for tighter regulation and more aggressive oversight on the financial products consumers depend upon, one of Bitcoin's potential advantages — in addition to perhaps being in some cases "cheaper [and] faster," CFPB concedes — is that it is less responsive to government pressures than your more traditional currencies.
Read past CoinWorld.com coverage of virtual currencies:
- Mint director Ed Moy to speak at bitcoin convention
- Gold-backed virtual currency released by Anthem Vault
- Bitcoin St. Petersburg Bowl, sponsored by BitPay, to debut in 2014
- Bitcoins.com domain name expected to bring $750K
- Casascius, Titan physical bitcoins give numismatic identity