Back in August 2014, the CFPB published a Consumer Advisory entitled, “Risks to consumers posed by virtual currencies.” In the Advisory, the CFPB informs consumers of the risks associated with blockchain currency, including scams, cost as compared with credit cards, fewer protections when something goes awry, and the potential for hackers.
In the Advisory, the CFPB warns consumers about bitcoin and other blockchain currency. Risks include the threat of hackers and scammers that pose serious security threats. Because bitcoin and other blockchain currencies are virtual, fraud and breaches of even of the most advanced systems have occurred. And, unlike banks and other financial institutions, a virtual currency company may not provide the same protections in the event of fraud or hacking. Additionally, the costs associated with virtual currencies are unclear and can be volatile. For example, if a consumer enters the incorrect public keys for a purchase using virtual currency, the payment will go to the wrong recipient, and the consumer may not be able to recoup the funds. All of these considerations are also in the light of a very volatile market, in which the price for Bitcoin and other currencies fluctuate drastically on a daily basis.
However, since the 2014 Consumer Advisory, the CFPB has not released any major rules or guidance relating to blockchain currency. The CPFB’s inaction even prompted United States Senators to get involved. In July 2016, the US Senate Committee on Banking, Housing and Urban Affairs wrote to multiple organizations, including the CFPB, asking about FinTech and, specifically, blockchain technology. The letter includes the following language: “Please describe: What your agency has done to study and understand the various types of FinTech companies involved in marketplace lending, alternative payments, consumer lending, blockchain and distributed ledger, virtual currencies . . . .”
Just as the United States Senate was unfamiliar with blockchain, so too were American consumers. Before 2017, consumers simply were not complaining to the CFPB regarding virtual currency. According to student loan marketplace LendEDU, the CFPB only received 7 complaints about virtual currencies. Although blockchain and virtual currency such as bitcoin were perhaps not as prevalent a year ago, this number is surprisingly low, especially considering the CPFB received almost 190,000 total complaints in 2016. Such a low number shows that the majority of American consumers were not interested in virtual currencies until 2017 when multiple digital currencies surged in price.
Despite the request from Congress and the growing number of complaints, the CFPB has yet to provide substantive guidance or create rules to deal with blockchain and cryptocurrency. In 2016, the CFPB released a final rule dealing with prepaid products. The CFPB received comments from multiple parties requesting that the rule include virtual currency products, but the CFPB stated that its “analysis is ongoing with respect to virtual currencies and related products and services.” Thus, regarding virtual currencies, the CFPB explained that “application of . . . this final rule to such products and services is outside the scope of this rulemaking.”
For now, it is anyone’s guess as to when the CFPB will take up rulemaking as it relates to blockchain and virtual currency. However, given the rising number of complaints about virtual currencies, a CFPB intervention on the matter seems inevitable.