Regulators Urge Caution Over Bitcoin
The Consumer Financial Protection Bureau has moved to warn consumers of the risks associated with Bitcoin and other digital currencies. The federal regulatory body has said that it will start tackling complaints from members of the public who use virtual currencies and the online exchanges that trade in them.
In a statement, agency director Richard Cordray described Bitcoin as "the Wild West." He acknowledged that online currencies can offer numerous advantages in the world of e-commerce, but emphasized that they present many potential downsides too, and that unlike conventional bank deposits, virtual currencies are not underwritten by the government.
Cordray cautioned consumers that Bitcoin and its ilk are proving to be popular targets for hackers and other cyber-criminals, and can be subject to violent swings in exchange rates. The CFPB had previously alerted investors to the risk of Ponzi schemes associated with digital currencies.
Advocates of online currencies were quick to respond. Jim Harper, senior legal advisor to the Bitcoin Foundation, spoke positively of the warning. He welcomed a "helpful" clarification which informed the public without sounding an alarmist note.
Harper stated that all nascent technologies entail a certain amount of risk for early adopters, but countered that an educated public given useful guidance by the authorities would be well placed to identify potential pitfalls. He described the CFPB's assessment as fair, but argued that volatility in digital currencies would decline as the use of such markets became more common, making repeats of previous violent swings in Bitcoin values increasingly unlikely.