Digital currencies may be up for regulation from the Consumer Financial Protection Bureau. The CFPB issued a consumer advisory on virtual currencies and announced that it will begin taking complaints on the currencies.
Taking complaints on a particular product often precedes CFPB rule-making, and the bureau said it will use the collected complaints to better understand the virtual currency market and its effect on consumers.
Other government regulators have begun looking into virtual currencies, including the Securities and Exchange Commission, and New York Superintendent of Financial Services Benjamin Lawsky. A June report from the Government Accountability Office called CFPB attention to virtual currencies “limited,” saying that current regulatory efforts have not focused on consumer protection issues.
“Recent events have highlighted the risks individuals face in buying and holding these currencies,” the report said, referencing several thefts by hackers. “Certain parties have taken actions to inform consumers about the potential risks associated with virtual currencies, but these actions have occurred outside of federal interagency efforts and have not included CFPB.”
In its advisory, the bureau noted that virtual currencies are not backed by any government or central bank and accounts do not carry the protection of insurance.
The bureau also warned against a number of potential issues such as unclear costs, volatile exchange rates, the threat of hacking and scams, and the possible lack of assistance in the event of lost or stolen funds.
“Virtual currencies may have potential benefits, but consumers need to be cautious and they need to be asking the right questions,” said CFPB Director Richard Cordray. “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.”