CFPB to Consumers: Don't Rush to Bite on Bitcoin
NEW YORK (TheStreet) — Bitcoin, the digital currency created back in 2009 to eliminate middlemen such as banks from currency transactions, is increasingly on the radar screen of economists, Wall Street and consumers.
All that attention has attracted the Consumer Financial Protection Board, out with a warning this week about Bitcoin and other digital currencies.
Bitcoin is a problem for the government. It’s largely unregulated, offers no or low usage fees and is operated by a decentralized authority that is difficult to monitor by federal regulators accustomed to working with government-sponsored currencies such as the U.S. dollar or British sterling. The currency operates as an asset number that appears on a ledger powered by a massive computer network.
But Bitcoin’s popularity is soaring. Backers note that a digital currency may have particular appeal to the underbanked and unbanked demographic, and the currency’s value stands at around $509, compared with just $13 at the start of 2013.Read More: 3 Investment Essentials to Keep in Mind as Stocks Get Shaky Again That’s one reason the CFPB is warning about virtual currencies, and consumers would do well to listen. “Virtual currencies may have potential benefits, but consumers need to be cautious and they need to be asking the right questions,” says Richard Cordray, CFPB’s director. “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.” Specifically, the agency is warning consumers to watch out for “unclear costs, volatile exchange rates, the threat of hacking and scams,” along with the possibility of consumers having funds stolen by unscrupulous market operators. It’s also pointing to potentially shady firms surrounding the Bitcoin market, including some virtual currency exchanges and digital wallet providers who store Bitcoin assets for customers. Read More: Young Americans Prefer Bank Investments, Not Stock Market Federal officials also warn consumers that Bitcoin accounts are not backed by the U.S. Federal Deposit Insurance Corp. or the National Credit Union Share Insurance Fund. Consequently, if a Bitcoin consumer loses money (which the CFPB says happens “all the time”) it won’t be covered by the loss by Uncle Sam. There is instability in the Bitcoin market,. Values have been to known to drop at alarming rates on short notice (the digital currency fell by 80% on a single day earlier this year), and consumers need to know that.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV