Bitcoin and other virtual currencies, used by some consumers as an alternate way to manage their money and purchases online, are extremely risky, the Consumer Financial Protection Bureau (CFPB) warned (PDF) on Monday. With its announcement the agency said it will begin accepting complaints from consumers who run into an issue with one of the currencies.
Among the issues at play for consumers are the risk of hacking, the volatility of exchanges and getting a clear handle on the value of the currencies, as well as the lack of help for consumers in getting refunds when currency is lost or stolen, the CFPB said.
"Virtual currencies may have potential benefits, but consumers need to be cautious and they need to be asking the right questions," CFPB Director Richard Cordray said in a statement. "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."
Among the more popular virtual, or digital, currencies are Bitcoin, XRP, and Dogecoin. The CFPB notes that because they are not backed by any government and accounts that hold the currencies are not insured by the FDIC or its credit union equivalent, consumers have no backstop if there's a failure.
The CFPB noted that the volatility of the currencies alone is a major concern, pointing out that the Bitcoin exchange rate dropped by as much as 61 percent in just one day last year, and up to 80 percent in one day this year. And, the agency said, the currencies are a big target for fraud with all sorts of operations springing up that trade the currencies or exchange them for other currencies. The agency urges consumers to look into any company that will be handling their virtual currency before doing business with them.
If you have a complaint regarding using digital currency or dealing with a company that handles the currencies, you can file a complaint with the CFPB.
The CFPB said it will try to work with the companies involved to get a resolution to complaints as well as analyze them to determine if any enforcement action or new consumer protections are necessary.