GAO report recommends increased CFPB participation in virtual currency efforts

by Ballard Spahr LLP
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In a report issued last week on virtual currencies, the Government Accountability Office recommended increased CFPB participation in interagency efforts related to such currencies.

The report, entitled “Virtual Currencies: Emerging Regulatory, Law Enforcement, and Consumer Protections Challenges,” reviews various actions that federal financial regulators and law enforcement agencies have taken related to the emergence of virtual currencies. Those actions include the issuance of regulatory guidance and the investigation of crimes and violations that have been facilitated by the use of virtual currencies.

The report observes, however, that interagency working groups have not focused on consumer protection issues. It states that “because virtual currency systems provide a new way of making financial transactions, and the CFPB’s responsibilities include ensuring that consumers have timely and understandable information to make responsible decisions about financial transactions,” the CFPB “might be a relevant participant in a broader set of collaborative efforts on virtual currencies.” The report further states that without CFPB participation, “interagency groups are not fully leveraging the expertise of the lead consumer financial protection agency, and the CFPB may not be receiving information that it could use to assess the risks that virtual currencies pose to consumers.”

The report includes the CFPB’s letter responding to the report in which in concurs with the GAO’s recommendations that the CFPB (1) identify which interagency working groups could help the CFPB maintain awareness of emerging consumer protection issues or would benefit from CFPB participation, and (2) decide, in coordination with the agencies already participating in efforts related to virtual currencies which efforts the CFPB should participate in.

In November 2013, Ballard Spahr partner Mercedes Kelley Tunstall, who leads the firm’s Privacy and Data Security Group, testified on virtual currencies before two subcommittees of the U.S. Senate Committee on Banking, Housing and Urban Affairs. Mercedes advises banking clients nationwide on payments and cybersecurity issues, including those involving virtual currencies. At the hearing, she addressed the commercial viability of digital currencies, regulatory options, and how to respond to other emerging virtual currencies.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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