The Consumer Finance Protection Bureau (CFB) this week came out with a set of guidelines for consumers interested in buying and selling virtual currencies. Silicon Valley evangelists (and investors, there may be a correlation there) such as Marc Andreessen believe that Bitcoin today is where the internet was in the 1990s—a fledgling technology that will revolutionize the world as we know it, its current flaws notwithstanding.
The CFPB, on the other hand, has a very clear mandate: protect the interest of financial services consumers today. Its document minces no words in pointing out that the average consumer must spend substantial time in exercising diligence with regards to virtual currencies. It identifies three key risks as clear and substantial: exchange rate volatility, risk of theft from cyber criminals, and lack of insurance in the event of loss or theft.
“Virtual currencies may have potential benefits, but consumers need to be cautious and they need to be asking the right questions,” said CFPB Director Richard Cordray. “Virtual currencies are not backed by any government or central bank, and at this point consumers are stepping into the Wild West when they engage in the market.”
The CFPB is the latest among a number of government agencies to take a close look at Bitcoin; others include the GAO, FinCEN, IRS, and the New York Department of Financial Services (NYDFS). So far their approach seems to have been a nuanced one, clearly highlighting risks without imposing a blanket ban that will hinder possible innovation in the nascent space; this is to be commended.
To read the full story, go to the Consumer Finance Protection Bureau.