August 24, 2014

CFPB underscores Bitcoin users have no federal net

Aug. 12, 2014 – Bitcoin and other virtual currencies were flagged in a consumer advisory Monday by CFPB for their lack of federal deposit or share insurance – so if a virtual currency company fails, "the government will not cover the cost."

"The CFPB advises consumers to be aware of potential issues with virtual currencies such as unclear costs, volatile exchange rates, the threats of hacking and scams, and that companies may not offer help or refunds for lost or stolen funds," the bureau said in its announcement. It also spelled out that virtual currency accounts are not protected by FDIC or NCUA.

In addition to its warning, which was highlighted on the CFPB blog, the bureau also announced it is now accepting complaints about virtual currency products via its consumer complaint database.

The better-known virtual currencies are Bitcoin, XRP and Dogecoin; they are also called digital currencies. CFPB notes in its advisory that the currencies allow people to track, store and send payments over the Internet. However, it says exchange rates are volatile, with the exchange rate of Bitcoins to U.S. cdollars in 2013 falling as much as 61 percent in a single day.

CFPB also warns that virtual currencies are targets for highly sophisticated hackers and scammers, and some virtual currency companies do not identify their owners.