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CFPB adds its warning on bitcoins

By Allison Ross · Bankrate.com
Monday, August 11, 2014
Posted: 5 pm ET

Add the Consumer Financial Protection Bureau to the list of agencies warning consumers about the perils of bitcoin and other cryptocurrencies.

"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 in a statement today as his bureau issued a consumer advisory on the subject. He called the cryptocurrency market "the Wild West."

The CFPB is now accepting complaints from consumers who have had problems related to virtual currencies, including with exchange services where consumers can buy and sell bitcoin, and with online digital wallets.

<p class="source">© LUCY NICHOLSON/Reuters/Corbis</p>

© LUCY NICHOLSON/Reuters/Corbis

It highlights several concerns it says it has about the risks of virtual currencies, including the volatility of their prices, the possibilities of hackers or scammers, and the trouble with getting refunds if virtual currency is stolen or if a consumer disputes a charge.

Not the first advisory

The U.S. Government Accountability Office (GAO) in June brought up the issues of bitcoin regulation and called out the CFPB for not having waded into the discussion:

Federal agencies also have begun to collaborate on virtual currency issues through informal discussions and interagency working groups primarily concerned with money laundering and other law enforcement matters. However, these working groups have not focused on emerging consumer protection issues, and the Consumer Financial Protection Bureau (CFPB) -- whose responsibilities include providing consumers with information to make responsible decisions about financial transactions -- has generally not participated in these groups.

The CFPB's advisory is by no means earth shattering. The U.S. Securities and Exchange Commission (SEC) also has released a warning that bitcoin "does not have an established track record of credibility and trust" and could be ripe for scammers. And last month, the Financial Crimes Enforcement Network noted in a report that "suspicious activity" related to bitcoin appears to be on the rise.

Bankrate has been focused on helping consumers understand bitcoin and other cryptocurrencies. To see what it's like to buy, sell and use bitcoin, see my first-person account here.

And if you're tired of the word "bitcoin," check out some of the cryptocurrency alternatives.

Follow me on twitter: @allisonsross.

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