The CFPB flagged bitcoin and other digital currencies on Monday in a consumer advisory because of a lack of federal deposit or share insurance, telling consumers that the government will not back any related losses.
The agency said that while digital currencies like XRP, Dogecoin and bitcoin could make payment processing faster and more cost effective, losses are not backed by any government or central bank, meaning consumers could be out of money if a virtual currency company goes under.
“The CFPB advises consumers to be aware of potential issues with virtual currencies such as unclear costs, volatile exchange rates, the threat of hacking and scams, and that companies may not offer help or refunds for lost or stolen funds,” the CFPB said.
According to the advisory, exchange rates for digital currencies are volatile—in 2013, the exchange rate of bitcoin to U.S. dollars fell as much as 61 percent in a single day. The advisory also said digital currencies are targets for scammers and hackers.
“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. “…[A]t this point consumers are stepping into the Wild West when they engage in the market.”
Consumers who encounter an issue with products and services provided by virtual currency companies can submit a complaint to the CFPB. If the complaint relates to an issue outside the agency’s jurisdiction, it will forward the complaint to the appropriate regulator.