Dive Brief:
- The Consumer Finance Protection Bureau (CFPB) has received 8,300 crypto-asset complaints since October 2018 with the majority of those in the past two years, according to a bulletin released Thursday.
- Consumers listed fraud and scams as the main issue in 40% of the crypto-related complaints registered since October 2018, the agency said.
- “Our analysis of consumer complaints suggests that bad actors are leveraging crypto-assets to perpetrate fraud on the public,” CFPB Director Rohit Chopra said in the bulletin. “Americans are also reporting transaction problems, frozen accounts, and lost savings when it comes to crypto-assets.”
Dive Insight:
Complaints surged with the rise of price volatility and the adoption of crypto assets in recent years, the bureau said.
The bulletin comes in the wake of a proposed — and later canceled — acquisition of crypto exchange FTX by competitor Binance.
Binance CEO Changpeng Zhao said Tuesday he would bail out FTX amid a “liquidity crunch.” Zhao reversed course Wednesday, after looking at FTX’s balance sheet.
The Securities and Exchange Commission, Commodity Futures Trading Commission, and Justice Department, incidentally, are investigating whether FTX improperly handled customer funds.
The drama that unfolded on social media prompted Rep. Patrick McHenry, R-NC, the ranking member of the House Financial Services Committee, to ask for tougher regulations around digital assets, American Banker reported.
Money transmission licenses primarily regulate most cryptocurrency exchanges at the state level, but there is a lapse from the federal government, the publication noted. Many businesses dealing with digital assets are registered with the Financial Crimes Enforcement Network (FinCEN), but not all follow the anti-money laundering guidelines the agency issues.
Poor customer service was the common theme running through most of the complaints, the CFPB found. Transactional issues made up one-quarter of the complaints, while lack of availability when needed made up 16%.
“Hacks by malicious actors have marred crypto-assets, and led to significant financial loss by consumers with no recourse for recovering stolen funds,” the bulletin indicated.
Fraudsters know their way around crypto exchange platforms and can obscure their movement of crypto assets to other accounts making it difficult and time-consuming for regulators and law enforcement to trace the stolen crypto assets, the CFPB said.
The bureau also cautioned against romance and “pig butchering” scams, and other tricks employed by “malicious actors” to extort money. Since there are no government agencies or financial regulators to insure crypto assets, clients must rely on the online resources of the Federal Trade Commission and the CFPB to identify scams, the agency said.
“People should be wary of anyone seeking upfront payment in crypto-assets, since this may be a scam,” Chopra said. “We will continue our work to keep the payments system safe from fraudsters targeting Americans.”
