Washington-based independent government agency, the US Consumer Financial Protection Bureau (CFPB), urges consumers to be more cautious while using bitcoin and other digital currencies.
The CFPB warned consumers that there are certain risks relating to virtual money, among others its volatility, security threats from hackers and unclear costs. Moreover, the agency advisory states that in case of lost or stolen funds, the companies are not always able to help or provide refunds.
Two months earlier, the Government Accountability Office asked the CFPB to pay more attention to the cryptocurrency sector.
The director of the CFPB, Richard Cordray, said: “Virtual currencies may have potential benefits, but consumers need to be cautious and they need to be asking the right questions. 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 issued document provides a list of main services and products of digital currency firms, including wallets and private keys, and mentions the risks of each of the services.
The agency is now receiving complaints from consumers about services and products in the digital currency industry.
The CFPB also noted that it has received a number of anecdotal complaints. For instance, some people could not recover lost or stolen funds from exchanges. One user had to discard hard drive that kept private keys for 7,500 bitcoins. The other one sent virtual money without receiving any answer form the person involved in the transaction.
The agency will utilize the collected data in order to better understand how digital currency affects consumers. Moreover, it will help to improve federal consumer financial laws.
CEO of Wall Street bitcoin exchange and electronic communication network Coinsetter, Jaron Lukasiewicz, noted there certain advantages that digital currency present. He said: “The CFPB’s bulletin provides a comprehensive list of the risks associated with bitcoin, and I encourage anyone who is not already familiar with them to read it. Not covered in the CFPB’s letter are the many benefits to using bitcoin, including the fact that it is a low cost alternative to banking for underprivileged families.”
Chairman of the Bitcoin Foundation’s Regulatory Affairs Committee and New York business attorney posted on twitter, saying the CFPB has a biased approach to virtual money. In addition, Fred Ehrsam, Coinbase founder considers the report is disappointing and is presented from one side.
Although some consider that consumer protection might restrain development of innovations, others think it is very beneficial as it will increase mainstream interest.
Bitcoin Foundation policy counsel, Jim Harper, said: “It is standard practice for agencies at the state, federal, and international levels to issue warnings about bitcoin. There are consumer risks around new technologies, and even-keeled educational material from government agencies can help make consumers aware and savvy.”