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CFPB to take consumer complaints on Bitcoin, virtual currency

Mon, Aug 18, 2014

Washington, District Of Columbia

Volatile exchange rates and the threat of hacking and scams have led the Consumer Financial Protection Bureau (CFPB) to now accept complaints on virtual currency products and services.

The bureau also issued a consumer advisory warning about the risks of such virtual currencies Monday.

Designed to be an alternative to current payment systems, virtual currencies--which include Bitcoin, XRP and Dogecoin--are used to track, store and send payments over the Internet. While benefits can include faster and cheaper processing, the currencies are not backed by a government or central financial institutions.

Because of this, virtual currency accounts are not insured by the Federal Deposit Insurance Corp. or the National Credit Union Share Insurance Fund, meaning if a virtual currency company fails, the government will not cover the loss.

CFPB Director Richard Cordray likened consumers engaging in the virtual currency market to "stepping into the Wild West."

Additional services in the virtual currency market include virtual currency exchanges, which help consumers buy or sell virtual currencies and online "digital wallet providers," which allow consumers to create accounts with them to store and manage their virtual currencies. Many virtual currency exchanges are also wallet providers, and vice versa.

Some virtual currency companies do not identify owners, provide phone numbers and addresses, or even specify the country in which they are located. Others disclaim responsibility for consumer losses if funds are lost or stolen.

According to the CFPB, if a consumer submits a complaint about a virtual currency or virtual currency service, the CFPB will send the complaint to the appropriate company and will work to get a response. If the complaint is about an issue outside the CFPB's jurisdiction, the bureau will forward the complaint to the appropriate federal or state regulator.

The CFPB says it plans to use all complaints to better understand the virtual currency market and its effect on consumers, as well as shape future law enforcement and regulatory policies going forward.

CFPB Consumer Advisory on virtual currencies (PDF)


Source: CUNA News Now