The Consumer Financial Protection Bureau (CFPB), an independent U.S. government agency responsible for protecting consumers in the financial sector, was recently requested by another government agency to become more active in developing virtual currency policies.
The request was made in a confidential May report published this week by the Government Accountability Office (GAO), which is the investigative arm of Congress, said Bloomberg. The new report provides an overview of various Bitcoin-related efforts by the federal government, and narrows its focus on the lack of CFPB involvement.
“Federal interagency working groups addressing virtual currency issues have not focused on consumer protection, and CFPB has generally not participated in these groups,” said the report, titled ‘Virtual Currencies: Emerging Regulatory, Law Enforcement, and Consumer Protection Challenges.’
Due to incidents involving the use of virtual currencies for illicit purposes, so far, money laundering and other law enforcement issues have been primary concerns.
“Emerging consumer risks indicate that interagency collaborative efforts may need to place greater emphasis on consumer protection issues in order to address the full range of challenges posed by virtual currencies,” adding that “without CFPB’s participation, interagency working groups are not fully leveraging the expertise of the lead consumer financial protection agency, and CFPB may not be receiving information that it could use to assess the risks that virtual currencies pose to consumers.”
The GAO cites recent “loss or theft of bitcoins from exchanges and virtual wallets and consumer warnings issued by non-federal and non-U.S. entities” as reasons for why interagency collaborative efforts involving the CFPB are needed to address consumer-protection issues.
Recommendations for executive action are as follows: “To help ensure that federal interagency collaboration on virtual currencies addresses emerging consumer protection issues, we recommend that the Director of CFPB (1) identify which interagency working groups could help CFPB maintain awareness of these issues or would benefit from CFPB’s participation; and (2) decide, in coordination with the agencies already participating in these efforts, which ones CFPB should participate in.”
The GAO also raised questions as to how many virtual currency users could be considered speculative investors, and how many are ordinary consumers. As of February 2014, only 14 out of 290,000 complaints in the CFPB database mentioned virtual currency or Bitcoin.
Bloomberg reported that the CFPB’s acting assistant director for card and payment markets, William Wade-Gery, wrote in a May 6 letter to the GAO, “We’re looking forward to increasing our involvement in formal working groups as they engage on specific issues relating to consumer protection.”
In the letter, Wade-Gery said that the CFPB is consulting with various state and federal regulators as well as with academics and members of the Bitcoin industry.
According to Bloomberg, Senator Tom Carper “sought the report to clarify what the U.S. government is doing to build a legal framework for digital currencies that cross regulatory boundaries.”
Carper said in an e-mail that “GAO’s report underscores the importance that all sectors — law enforcement, industry, relevant regulators, and consumer protection agencies — must come to the table and engage in meaningful dialogue to provide clear rules of the road for entrepreneurs, investors, and consumers alike.”
The Bitcoin Foundation’s Jim Harper also picked up on the report today, which he dedicated a blog post to.
“I think it’s a little premature to lament CFPB’s non-involvement, though. The report pegs the total value of all Bitcoin at US$5.6 billion, compared to $2.7 trillion in U.S. currency at depositary institutions, and it cites Bitcoin transaction rates ranging from 29,000 to 102,000 per day. The Federal Reserve processed 44 million ACH transactions per day in 2013. Bitcoin isn’t where the consumer protection action is.”
Harper added that the two federal agencies that are really missing from the Bitcoin scene are the Commerce Department and the State Department – because of Bitcoin’s potential to spur economic growth, create new jobs, and drive innovation.
“Outcomes that the Bitcoin community broadly seeks include global financial inclusion, enhanced human liberty and dignity worldwide, greater financial privacy for law-abiding people, and a stable money supply in countries where the currency is mismanaged. Commerce and State both work to advance these and similar values, and on increased trade, peace, prosperity, and security.”