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Ramp up role in Bitcoin, U.S. consumer agency told
June 27, 2014 / 8:53 PM / 3 years ago

Ramp up role in Bitcoin, U.S. consumer agency told

WASHINGTON (Reuters) - The U.S. Consumer Financial Protection Bureau should play a bigger role in shielding people against risks from virtual currencies such as Bitcoin, a government watchdog said on Friday.

The screen of Southern California's first two bitcoin-to-cash ATMs which began operating today, is seen in Locali Conscious Convenience store in Venice, Los Angeles, California, June 21, 2014. REUTERS/Lucy Nicholson

Federal regulators have started working together to gauge the risk in these virtual currencies, which are generated by computers outside the control of governments.

But their efforts have mainly centered on money laundering, and the CFPB, a new agency set up after the 2007-09 crisis, had not participated in these discussions, it said.

“Recent events suggest that consumer protection is an emerging risk,” the report by the Government Accountability Office said. “However ... participation by the federal government’s lead consumer financial protection agency, CFPB, has been limited.”

For that reason, the CFPB should take part in these discussions between the agencies, the report said. The CFPB had agreed to the recommendation.

Recent mishaps have brought Bitcoin under heightened scrutiny from regulators. Mt. Gox, a Tokyo-based Bitcoin exchange, filed for bankruptcy after losing an estimated $650 million worth of client Bitcoins.

So far, U.S. federal regulators have been relatively mum on Bitcoin. The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) last year classified administrators or exchangers of Bitcoin as money transmitters, which puts them under the remit of state regulators.

The Commodity Futures Trading Commission is studying whether it has jurisdiction, given that some firms are considering offering Bitcoin derivatives. The U.S. Internal Revenue Service has designated Bitcoin as property, not currency.

Senator Tom Carper, a Democrat from Delaware, had requested the GAO report. The Senate Committee on Homeland Security and Government Affairs, which he chairs, is conducting its own investigation into Bitcoin.

Reporting by Douwe Miedema; Editing by Diane Craft

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