CFPB Adds Bitcoin to Complaint Database
The CFPB announced Monday it’s accepting complaints from consumers about virtual currencies such as bitcoin.
The CFPB warned consumers about significant dangers of virtual currencies, such as a lack of protection. The bureau reminded individuals that the FDIC and the NCUA do not insure virtual currency accounts, so any losses are not covered.
“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. “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.”
According to the CFPB, the exchange rate of bitcoins to U.S. dollars last year dropped as much as 61% in one day while the value of bitcoins decreased as much as 80% in a single day. The CFPB also warned that hackers are targeting virtual currencies.
“Individuals, digital wallet providers and exchanges are all at risk. For example, if a hacker gains access to a consumer’s bitcoin ‘private keys,’ which are 64-character codes that unlock the consumer’s funds, the consumer can lose all (his or her) virtual currency,” a CFPB press release said.
“Fraudsters are also taking advantage of the hype surrounding virtual currencies to pose as bitcoin exchanges, bitcoin intermediaries and bitcoin traders in an effort to lure consumers to send money, which is then stolen,” the release also said.
According to the CFPB, virtual currency companies may not help a consumer with any lost or stolen funds. The CFPB said some virtual currency companies will deny any responsibility if funds are stolen.
“Some virtual currency companies do not identify their owners, provide phone numbers and addresses, or even specify the country in which they are located. Before using a company’s products or services, consumers should carefully consider if they know how to contact the company in question, and if they know their contractual rights,” the CFPB recommended. “If a consumer trusts a company to hold their virtual currencies and something goes wrong, the company may not offer the kind of help the consumer would expect from a bank, debit card, or credit card provider.”