CFPB Issues Advisory on Bitcoin, Virtual Currencies
On August 11, 2014, the Consumer Financial Protection Bureau released a Consumer Advisory about virtual currencies. The Advisory followed a directive by the U.S. Government Accountability Office for the CFPB to conduct a close examination of the world of virtual currencies. The complete Advisory can be found here.
The Advisory includes a description of virtual currencies (which include the ubiquitous Bitcoin) and how virtual currency exchanges and investments work. It goes on to provide multiple warnings and risk factors relating to investments in Bitcoin and similar currencies, including:
The lack of government and regulatory oversight and protection,
Volatile exchange rates and extreme price fluctuations, and
The dangers posed by computer hackers and investment scams.
Even where an investment in digital money is “legitimate,” there may still be hidden costs involved.
In the Advisory, the CFPB notes that the SEC has already released warnings about fraudulent virtual currency investment schemes, including a virtual currency alert and an investor alert regarding bitcoin.
The CFPB will now be accepting consumer complaints relating to virtual currency issues.