Federal Consumer Advocate: Bitcoin Users, You’re ‘On Your Own’

The Consumer Financial Protection Bureau said Monday it will start taking bitcoin-related complaints.

A man talks on a mobile phone in a shop displaying a bitcoin sign during the opening ceremony of the first bitcoin retail shop in Hong Kong on February 28, 2014.
National Journal
Dustin Volz
Aug. 11, 2014, 8:53 a.m.

Bit­coin and its brethren might soon change the worlds of fin­ance and bank­ing, but for now di­git­al cur­ren­cies are chock-full of cata­stroph­ic risks and dangers.

That’s the con­clu­sion of a strongly worded con­sumer ad­vis­ory re­leased Monday by the Con­sumer Fin­an­cial Pro­tec­tion Bur­eau, in­ject­ing an­oth­er dose of skep­ti­cism from fed­er­al reg­u­lat­ors in­to the de­bate over the safety of vir­tu­al cur­rency that is sure to draw ire from an ex­pand­ing com­munity of vir­tu­al pay­ment de­votees.

CFPB’s re­port warns of the risks of hack­ers and scams when us­ing bit­coin, and notes the in­creased volat­il­ity in the mar­ket be­cause the cur­ren­cies are not backed or in­sured by any gov­ern­ment en­tity and be­cause trans­ac­tions are of­ten an­onym­ous.

Due to bit­coin’s de­cent­ral­ized struc­ture, con­sumers may have little re­course for re­cov­er­ing stolen or lost in­vest­ments, ac­cord­ing to the ad­vis­ory.

“With a tra­di­tion­al bank ac­count or pay­ment card, if someone breaches your ac­count, your bank or pay­ment card com­pany will help you re­cov­er some or all of your funds,” the re­port reads. “If you’re stor­ing your vir­tu­al cur­ren­cies on your own com­puter, you’re ba­sic­ally on your own if your vir­tu­al cur­rency is stolen. There is no oth­er party to help you.”

It also de­clared that “bit­coin ‘ATMs’ are not ATMs at all” and sug­ges­ted the en­tire di­git­al cur­rency en­ter­prise was sus­cept­ible to Ponzi schemes, cit­ing re­cent ab­uses and crashes of prom­in­ent ex­changes over the past year.

Bit­coin is the most pop­u­lar brand of di­git­al cur­ren­cies, which can be swapped for tra­di­tion­al green­backs or used at a grow­ing num­ber of par­ti­cip­at­ing on­line vendors and brick-and-mor­tar re­tail­ers.

Bit­coin evan­gel­ists see it as a quick and in­nov­at­ive form of pay­ment that ducks some bank­ing fees typ­ic­ally as­so­ci­ated with on­line trans­ac­tions. But reg­u­lat­ors have long ex­pressed con­cern about di­git­al cur­ren­cies, which they say can provide bad act­ors with an an­onym­ous way to laun­der money and par­ti­cip­ate in drug traf­fick­ing.

The ad­voc­ates down­played the sig­ni­fic­ance of the CFPB re­port.

“This is a fairly stand­ard warn­ing,” said Jim Harp­er, glob­al policy coun­sel with the Bit­coin Found­a­tion. “I’d love for them to be thor­oughly pro-bit­coin, but their job is to warn, and that is what the re­port does.”

The con­sumer watch­dog also an­nounced it will start tak­ing com­plaints about di­git­al cur­rency ex­changes and wal­lets, as part of an at­tempt to bet­ter un­der­stand the grow­ing mar­ket.

Earli­er this year, the Gov­ern­ment Ac­count­ab­il­ity Of­fice en­cour­aged the con­sumer bur­eau to be more hands-on with cre­at­ing policies re­lated to di­git­al cur­ren­cies. The bur­eau, formed un­der the 2010 Dodd-Frank le­gis­la­tion that over­hauled fed­er­al reg­u­la­tions of the fin­an­cial in­dustry, agreed.

What We're Following See More »
STAFF PICKS
When It Comes to Mining Asteroids, Technology Is Only the First Problem
2 days ago
WHY WE CARE

Foreign Policy takes a look at the future of mining the estimated "100,000 near-Earth objects—including asteroids and comets—in the neighborhood of our planet. Some of these NEOs, as they’re called, are small. Others are substantial and potentially packed full of water and various important minerals, such as nickel, cobalt, and iron. One day, advocates believe, those objects will be tapped by variations on the equipment used in the coal mines of Kentucky or in the diamond mines of Africa. And for immense gain: According to industry experts, the contents of a single asteroid could be worth trillions of dollars." But the technology to get us there is only the first step. Experts say "a multinational body might emerge" to manage rights to NEOs, as well as a body of law, including an international court.

Source:
STAFF PICKS
Obama Reflects on His Economic Record
2 days ago
WHY WE CARE

Not to be outdone by Jeffrey Goldberg's recent piece in The Atlantic about President Obama's foreign policy, the New York Times Magazine checks in with a longread on the president's economic legacy. In it, Obama is cognizant that the economic reality--73 straight months of growth--isn't matched by public perceptions. Some of that, he says, is due to a constant drumbeat from the right that "that denies any progress." But he also accepts some blame himself. “I mean, the truth of the matter is that if we had been able to more effectively communicate all the steps we had taken to the swing voter,” he said, “then we might have maintained a majority in the House or the Senate.”

Source:
STAFF PICKS
Reagan Families, Allies Lash Out at Will Ferrell
2 days ago
WHY WE CARE

Ronald Reagan's children and political allies took to the media and Twitter this week to chide funnyman Will Ferrell for his plans to play a dementia-addled Reagan in his second term in a new comedy entitled Reagan. In an open letter, Reagan's daughter Patti Davis tells Ferrell, who's also a producer on the movie, “Perhaps for your comedy you would like to visit some dementia facilities. I have—I didn’t find anything comedic there, and my hope would be that if you’re a decent human being, you wouldn’t either.” Michael Reagan, the president's son, tweeted, "What an Outrag....Alzheimers is not joke...It kills..You should be ashamed all of you." And former Rep. Joe Walsh called it an example of "Hollywood taking a shot at conservatives again."

Source:
PEAK CONFIDENCE
Clinton No Longer Running Primary Ads
2 days ago
WHY WE CARE

In a sign that she’s ready to put a longer-than-ex­pec­ted primary battle be­hind her, former Sec­ret­ary of State Hil­lary Clin­ton (D) is no longer go­ing on the air in up­com­ing primary states. “Team Clin­ton hasn’t spent a single cent in … Cali­for­nia, In­di­ana, Ken­tucky, Ore­gon and West Vir­gin­ia, while” Sen. Bernie Sanders’ (I-VT) “cam­paign has spent a little more than $1 mil­lion in those same states.” Meanwhile, Sen. Jeff Merkley (D-OR), Sanders’ "lone back­er in the Sen­ate, said the can­did­ate should end his pres­id­en­tial cam­paign if he’s los­ing to Hil­lary Clin­ton after the primary sea­son con­cludes in June, break­ing sharply with the can­did­ate who is vow­ing to take his in­sur­gent bid to the party con­ven­tion in Phil­adelphia.”

Source:
CITIZENS UNITED PT. 2?
Movie Based on ‘Clinton Cash’ to Debut at Cannes
2 days ago
WHY WE CARE

The team behind the bestselling "Clinton Cash"—author Peter Schweizer and Breitbart's Stephen Bannon—is turning the book into a movie that will have its U.S. premiere just before the Democratic National Convention this summer. The film will get its global debut "next month in Cannes, France, during the Cannes Film Festival. (The movie is not a part of the festival, but will be shown at a screening arranged for distributors)." Bloomberg has a trailer up, pointing out that it's "less Ken Burns than Jerry Bruckheimer, featuring blood-drenched money, radical madrassas, and ominous footage of the Clintons."

Source:
×