US CFPB Now Accepting Complaints Against Bitcoin Businesses
The US Consumer Financial Protection Bureau will now receive consumer complaints against bitcoin businesses.
The US Consumer Financial Protection Bureau (CFPB) has issued a new warning to consumers, advising that they should exercise caution when engaging with the bitcoin and digital currency markets.
The CFPB advisory urges consumers to be vigilant as there are risks to consider when dealing and transacting with digital currency; namely, volatile exchange rates, unclear costs, security threats posed by hackers and scammers and the possibility that companies may not always be able to provide help or refunds for lost or stolen funds.
Notably, the news comes two months after the Government Accountability Office, the investigative arm of the US Congress, asked the CFPB to look more closely at the digital currency industry.
CFPB director Richard Cordray echoed the agency’s emphasis on the risk posed by digital currencies in his remarks, adding:
The document offers introductions to the products and services offered by digital currency companies – like private keys and wallets – and mentions the risks each carry.
Filing complaints with the CFPB
The CFPB is an independent federal agency responsible for policing financial products and services. When it issued the advisory, it announced that it is currently accepting complaints from users about products and services in the digital currency market.
The agency also lined its advisory with anecdotal complaints it has received thus far.
For example, some individuals have told the CFPB they have been unable to recover lost or stolen funds from exchanges; one user had to discard hard drive that held the private keys to 7,500 BTC; and one sent digital currency without ever hearing back from the other person involved in the trade.
The invitation for consumer complaints marks the first time the agency has commented on the bitcoin industry, and indicates what could be the first step in its more close examination of the digital currency market.
The CFPB will use the information it collects to better understand how digital currencies affect consumers and help it enforce federal consumer financial laws and take consumer protection policy steps, if needed.
Bitcoin businesses react
Initial industry reaction to the release was mixed, with some prominent members of the community attempting to highlight how the statement could increase consumer awareness.
Jaron Lukasiewicz, CEO of New York-based bitcoin exchange Coinsetter, spoke to the report’s positive points. Users of digital currency products and services should be asking themselves about product benefits, security procedures and pricing, he said:
Other notable community members had markedly different reactions.
For example, New York business attorney and chairman of the Bitcoin Foundation’s Regulatory Affairs Committee Marco Santori implied on Twitter today that the CFPB’s warning presents a biased approach to digital currency basics.
.@CFPB publishes #bitcoin consumer alert. Not a single positive word on benefits to consumer financial privacy. http://t.co/B20eSqasQ6
— Marco Santori (@msantoriESQ) August 11, 2014
Likewise, Coinbase founder Fred Ehrsam called the report “disappointing” for its one-sided presentation.
Disappointing report from the @CFPB. It's their job to disclose all risks, but this reads like a wall of text of FUD: http://t.co/coe3qIFSoo
— Fred Ehrsam (@FEhrsam) August 11, 2014
Industry advocates call for action
The response from bitcoin's leading advocacy groups was more measured, even if they found the release to be a clear sign that bitcoin needs their further support.
Perianne Boring, president of the newly formed bitcoin advocacy group, the Chamber of Digital Commerce, said the release as evidence of why further bitcoin education in Washington, DC is badly needed.
Boring told CoinDesk:
Jim Harper, Bitcoin Foundation global policy counsel, also cited education in his remarks, telling CoinDesk:
The government’s ill-defined role in regulating bitcoin enterprises has become a contentious debate in the bitcoin community lately. Though some argue that having a consumer protection framework for digital currency businesses might stifle innovation in the space, others say it could be very advantageous bringing about mainstream interest more quickly.
US capitol building via Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.