Within the space of the last 12 months, the price of a single Bitcoin has ranged from under $100 to more than $1,000. Predictions about the future of the virtual currency have been just as scattered as its exchange rate: some financial pundits declared it dead, while lawmakers on Capitol Hill convened hearings to address concerns about its use by criminals.
While there’s no way to know for sure right now whether any computer-generated currency will ever gain wide acceptance, an announcement by the Consumer Financial Protection Bureau Monday suggested that, at least in the eyes of federal regulators, they are being taken more seriously.
On Monday, the CFPB released a consumer advisory about virtual currencies in general, mentioning not just Bitcoin, but competing currencies Dogecoin and XRP.
“[V]irtual currencies aren’t regular money,” the CFPB warned. “To begin with, virtual currencies are not issued or backed by the United States or any other government or central bank. No one is required to accept them as payment or to exchange them for traditional currencies. To work, they depend on the processing power of vast networks of unidentified, private computers around the world, which maintain and update a public ledger called the ‘blockchain.’ (Think of it as a public spreadsheet.)”
None of this will surprise anyone with a passing familiarity with virtual currencies. But the fact that the U.S. government’s consumer watchdog for financial protection has expressed serious interest in them is, by itself, big news for those actively engaged in trading them.
Most important is the CFPB’s decision to launch a system whereby consumers can lodge complaints about digital currency exchanges and transactions made on them. While it may seem innocuous, the fact that CFPB is collecting complaints about digital currencies suggests that the agency – which has been very aggressive with its rulemaking authority – is looking at Bitcoin and other virtual currencies as products that are within its regulatory purview.
“While virtual currencies offer the potential for innovation,” the agency said, “a lot of big issues have yet to be resolved – some of which are critical, including:
- Virtual currencies are targets for hackers who have been able to breach sophisticated security systems in order to steal funds
- Virtual currencies can cost consumers more to use than credit cards or even regular cash once you take exchange rate issues into consideration
- Fraudsters are taking advantage of the hype surrounding virtual currencies to cheat people with fake opportunities
- If you trust a company to hold your virtual currencies and something goes wrong, that company may not offer you the kind of help you expect from your bank or debit or credit card provider”
Again, none of this will surprise anyone familiar with electronic currencies. But for people familiar with the functioning of the U.S. financial regulatory regime, the CFPB’s willingness to accept consumer complaints about virtual currency transactions is important. When CFPB expresses interest in a product, as those in the payday lending industry can attest, new regulations often follow
CFPB’s announcement suggests that, for the government’s purposes at least, Bitcoin and products like it have hit the big time.
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