The Consumer Financial Protection Bureau (the “CFPB”) issued a consumer advisory (the “Advisory”) in which it describes risks faced by consumers when engaging in transactions that involve virtual currencies. The CFPB also announced that it would begin to accept consumer complaints regarding a virtual currency product or service.
After describing virtual currencies generally, the CFPB cautions consumers that, among other things, they should: (i) be aware that virtual currencies can experience dramatic price fluctuations; (ii) know with whom they are dealing before entering into a virtual currency transaction (e.g., obtain information about a dealer who proposes to sell the consumer virtual currency and check whether a virtual currency exchange is, as required, registered with FinCEN); (iii) understand the full costs of the transaction (including potential mark-ups to the exchange rate or other fees); (iv) be aware that virtual currencies are targets for hackers and scammers; (v) be aware that virtual currency companies may not offer help or refunds for lost or stolen customer funds; and (vi) understand that there is no governmental guarantee that stands behind virtual currency accounts. The CFPB in the Advisory also urges consumers to take steps to protect their private keys (used to access their virtual currency) from theft or loss.
The CFPB’s Advisory follows up on prior guidance related to the risks of virtual currencies issued by FinCEN, the SEC and certain federal and state bank regulators that focus upon financial institution safety and soundness concerns, investor protection and prevention of criminal activity rather than consumer protection. The CFPB did not indicate in the Advisory (or otherwise) that it intended to issue regulations concerning virtual currency.