The Consumer Financial Protection Bureau is beginning to take complaints on bitcoins and other forms of alternative currencies with the issuance of a consumer alert Monday about the controversial financial products.
In the alert, the CFPB cautioned bitcoins and their ilk were fraught with volatile exchange rates, hackers and scamsters, unclear costs and the dangers companies may not offer help or refunds for lost or stolen funds.
The agency also warned against using bitcoin kiosks that look like ATMs.
“Bitcoin kiosks do not connect to your bank and may lack many of the safeguards you would expect. They may also charge high transaction fees,” the alert said.
Bitcoin advocates claim one of the advantages is the holdings and transactions are anonymous, but the CFPB said this is a fallacy.
“Information about each and every bitcoin transaction is publicly shared and stored forever. Persistent, motivated people will likely be able to link your transactions to, among other things, your other transactions and public keys, as well as to your computer’s IP address. So it is possible that others will be able to estimate both how much Bitcoin you own and where you are,” the regulator said.
The warning and announcement by the CFPB that it is taking bitcoin complaints comes less than two months after the agency it was increasing its involvement with the Federal Reserve and the Office of the Comptroller of the Currency on looking into potential oversight.
A year ago, the Securities and Exchange Commission issued its own alert that promoters could lure investors excited about bitcoins into Ponzi schemes and other fabricated investments and transactions.
In April a representative of the Conference of State Bank Supervisors told a meeting of the North American Securities Administrators Association bitcoins regulation is a must because they are here to stay.
Last month, New York became the first state to unveil proposals to regulate bitcoin exchanges and companies that act as bitcoin “banks.”
Bitcoins have also come to the attention of law enforcement officials because they have been used extensively in drug trafficking and money laundering.