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Don't think of it just as currency or a new set of payment rails. To get a full sense of Bitcoin and its implications for banking, you have to think bigger than that.
February 25 -
More companies are accepting "altcoins" such as Litecoin and Dogecoin in addition to the more common Bitcoin, showing that even silly currencies based on Internet memes can open merchants to new markets of consumers.
April 10
WASHINGTON The Consumer Financial Protection Bureau waded into the debate about the future of digital currencies like Bitcoin, issuing a warning Monday that they pose significant risks to consumers.
The warning follows pressure from lawmakers and the Government Accountability Office to get regulators to write rules for virtual currencies and protect consumers.
The CFPB said currencies like Bitcoin can have volatile exchange rates, unclear costs, and potential for hacking and scams. The agency announced it is also accepting complaints on virtual currencies, which is one of its first steps toward potentially writing new regulations on a particular product.
"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 in a press release. "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."
Several federal regulators such as the Securities and Exchange Commission and New York Superintendent Benjamin Lawsky have begun clamping down on virtual currencies, but the CFPB has been criticized for not using its powers to examine potential harm to consumers. The GAO released a report in June saying the CFPB's efforts with regard to virtual currencies had been "limited" to date.
In its warning to consumers, the CFPB noted that virtual currencies are not backed by any government or central bank, nor are the funds supported by federal deposit insurance. It says digital currencies are still "experimental" and given to rapid price changes.
"In 2013, Bitcoin's price fell as much as 61% in a single day," the CFPB warning says. "In 2014, the one-day price drop has been as big as 80%."
It notes that Bitcoin kiosks may appear like ATMS, but "are not ATMs at all."
"Unlike ATMs that you may associate with your checking and savings accounts, Bitcoin kiosks do not connect to your bank and may lack many of the safeguards you would expect," the CFPB says. "They may also charge high transaction fees media reports describe transaction fees as high as 7% and exchange rates $50 over rates you could get elsewhere."
In addition to mentioning Bitcoin, the CFPB also mentions XRP and Dogecoin as examples of digital currency. The latter began as a joke, but
Virtual currencies have rapidly grown in recent years as a key payment source in transactions globally and regulations in the U.S. have been slow to catch up.
"Federal agencies also have begun to collaborate on virtual currency issues through informal discussions and interagency working groups primarily concerned with money laundering and other law enforcement matters," the GAO said in a report released June 26. "However, these working groups have not focused on emerging consumer protection issues, and the Consumer Financial Protection Bureau (CFPB)whose responsibilities include providing consumers with information to make responsible decisions about financial transactionshas generally not participated in these groups. ... As a result, future interagency efforts may not be in a position to address consumer risks associated with virtual currencies in the most timely and effective manner."
