Consumer Financial Protection Bureau issues advisory on virtual currencies

The Consumer Financial Protection Bureau (CFPB), an independent US government agency responsible for the protection of consumers in the financial sector, has issued an advisory titled “Risks to consumers posed by virtual currencies”.

The advisory, which is currently the main headline on the agency’s site, shares individual accounts and illustrations of what can go wrong when getting involved with digital currency. In one case, a woman sends fiat funds to a company’s bank account but never receives the coins. When she calls, the line is disconnected.

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Noted is that just because a virtual currency exchange registered with FinCEN, as required by law, it doesn’t mean their trustworthy. Another original topic of interest is Bitcoin ATMs, which “are not ATMs at all.” They may lack many of the safeguards one would expect. Citing unnamed media sources, transaction fees can be as high as 7% and exchange rates $50 over what can be found elsewhere.

Other more commonly known risks related to loss, hacking, theft and fraud are highlighted. Less known is their warning that a vulnerable bitcoin wallet also places its associated bank accounts at risk. The risks of relaying on the internet, no matter how big the company, are underscored:

“Even if you use best practices, anything that connects to the Internet—even big companies—can be hacked.”

The advisory ends by inviting anyone who experiences a problem to notify the CFPB.