US agency warns consumers about Bitcoin risks

Aug 11, 2014 by Josh Boak

Federal regulators are warning consumers about the risks of using virtual currencies such as Bitcoin.

The Consumer Financial Protection Bureau said Monday that it will begin fielding complaints from people who rely on products such as Bitcoin and online exchanges for such currencies.

In issuing an advisory , the agency noted that the currencies are not backed by the government, have volatile exchanges rates and are targeted by hackers and scammers. And unlike , Bitcoin-based deposits are not federally insured.

"Consumers are stepping into the Wild West," CFPB Director Richard Cordray said in a statement.

Still, Cordray acknowledged that "may have potential benefits," noting that they facilitate online transactions by making it easier to process payments.

The Securities and Exchange Commission previously issued an investor alert about Ponzi schemes involving virtual currencies.

Advocates for virtual currencies said they thought the CFPB's characterization of the currencies was generally fair.

Jim Harper, global policy counsel for the Bitcoin Foundation, called the CFPB's warning "pretty standard." He noted that it's "helpful to the extent that it informs consumers without scaring them."

"There are consumer risks around new technologies, and even-keeled educational material from government agencies can help make consumers aware and savvy," Harper said.

The CFPB's warning noted that Bitcoin prices can be highly volatile. In one day last year, it said, prices dropped as much as 61 percent.

But Harper said such volatility should wane in the next 10 to 15 years if virtual currencies become more common.

Explore further: Vietnam says bitcoin transactions are illegal

3.3 /5 (4 votes)
add to favorites email to friend print save as pdf

Related Stories

New York proposes regulations for virtual currency (Update)

Jul 17, 2014

New York became the first U.S. state on Thursday proposed establishing rules for firms involved in receiving, transmitting and storing virtual currency. The proposal by the Department of Financial Services would establish ...

Recommended for you

Netflix sues Yahoo CIO for alleged kickbacks

8 hours ago

Netflix is suing a former company vice president who is now chief information officer at Yahoo, accusing him of receiving money from vendors he hired to work with the video streaming company.

BlackBerry courts iPhone users with cash

Nov 25, 2014

Canadian smartphone maker BlackBerry is wooing Apple customers with a cash offer for trade-ins of iPhones for its new square-screened, keyboard-equipped Passport.

HP earnings show continued struggle

Nov 25, 2014

Venerable tech giant Hewlett-Packard has been struggling for three years to turn its business around. Its latest earnings show it still has more work ahead.

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.