Topic: Bitcoin Regulatory Update: CFPB Issues Consumer Advisory Regarding Virtual Curre (Read 740 times)

On August 11, 2014, the Consumer Finance Protection Bureau (“CFBP”) issued a consumer advisory warning customers of the potential risks associated with virtual currencies. A copy of the CFBP press release can be read here.

Created with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, CFPB, which began operations on July 21, 2011, was tasked with the responsibility of regulating both banks and nonbank institutions which offer financial products or services to ensure that these institutions comply with federal consumer financial protection laws. Under the Dodd-Frank act, CFPB is authorized to supervise all banks with more than $10 billion in assets as well as all sizes of nonbank mortgage companies, payday lenders, and private education lenders. Dodd-Frank also grants CFPB the power to regulate nonbank institutions in other consumer financial services markets.

CFPB’s consumer advisory does two things. First, it provides consumers a series of warnings and risks to be considered prior to entering into the virtual currency marketplace. According to CFPB, among the issues that consumers should be aware of prior to entering the virtual currency market include: 1) virtual currency is not a legal tender, not backed by any government, and digital wallets used to store such currency are not FDIC insured; 2) the exchange rate for virtual currency vis-à-vis fiat currency is very volatile and virtual exchanges may also charge additional mark-ups and fees for exchange and wallet services; and 3) digital wallets are the target of cyber-attacks and hackers and loses may not be recoverable.


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http://www.jdsupra.com/legalnews/bitcoin-regulatory-update-cfpb-issues-40275/