CFPB warns of the dangers of virtual currencies like Bitcoin
Yesterday, the Consumer Financial Protection Bureau (CFPB) issued its first consumer advisory on virtual currencies, which includes Bitcoin, and said that it would begin accepting complaints about such issues or companies. The agency warned that consumers must be wary of hackers and schemes, as well as volatile exchange rates and a lack of protection from the government.
“Virtual currencies may have potential benefits but consumers need to be cautious and they need to be asking the right questions,” Richard Cordray, the director of the bureau, said in a statement. “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.”
Bitcoin, as well as other popular virtual currencies such as XPR and Dogecoin, offer fewer consumer protections than traditional bans or credit card providers, according to the CFPB. Virtual currencies are also targets for “highly sophisticated hackers” and are subject to huge price fluctuations. The CFPB that virtual currencies offer massive potential for innovation, but “a lot of big issues have yet to be addressed”.
Barry Silbert, founder of online asset-selling marketplace SecondMarket, said he was happy to see the warnings, but he noted that some other currencies have similar risks. “I think it is fair to say that a number of the risks highlighted could also be applied to cash,” he said by email. “Investing in bitcoin is indeed risky, but using it is no more risky than using physical U.S. dollars.”
Read more about the story at Entrepreneur.