Thursday, August 14, 2014

Bitcoin Complaint to Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau issued a misinformed statement about the dangers of bitcoin other cryptocurrencies. The advisory was intended to instill fear and uncertainty about the new form of currency. Some of the inane statements include (italics ours):

  • Exchange rates are volatile and costs unclear (stock market and broker fees? Exchanges typically charge a flat rate 0.2% fee or less, which is as clear as it gets.)
  • Hackers and scammers pose serious security threats: Virtual currencies are targets for highly sophisticated hackers and scammers. Individuals, digital wallet providers, and exchanges are all at risk. (Bitcoin has already been tested and found secure. That is why individual companies like GOX that had not properly implemented bitcoin are touted instead of bitcoin as a technology being presented as flawed or insecure. Bitcoin can't be hacked by the US government, thus the attacks via advisories. Small hackers don't pose any risk. )
  • Companies may not offer help or refunds for lost or stolen funds (How is this specific to cryptocurrency? Isn't this why some people shop at Nordstrom )
The press release did help destabilize the bitcoin market and millions of people lost money. It was enough to inspire a mocking complaint with the CFPB about the CFPB.  The complaint is tongue-in-cheek, but also attempts to make some basic points.

Describe what happened so we can understand the issue:

The Consumer Financial Protection Bureau released a press release that adversely affected millions of individuals and businesses by erroneously implying that cryptocurrencies are more risky than traditional currencies and credit cards. Thousands of volunteers have worked in the open source development community to bring this innovative and promising new technology to the public. At the macro level, cryptocurrencies will reduce or eliminate credit card fraud, reduce bank fees, lower small business costs and untie money from government corruption and bad monetary policy. At an individual level, exposing personal identity information and credit details to strangers over the internet, to be viewed, copied, stolen and abused is an unnecessary risk associated with all credit card transactions and is directly addressed by cryptocurrencies like bitcoin. 
Stifling this technology through government power will hinder the economy and needlessly contribute to the harm done to millions through identity theft and credit card fraud annually.
It is apparent that the government is putting power above the public interest and is preying upon the uninformed. This sort of misinformation campaign is used to instill FUD (fear, uncertainty and doubt) in competitors, innovative ideas, improved products and superior technologies. Using the power of government in this way is deeply disturbing.
Further, there is no form on their website to submit a complaint relating to bitcoin or other cryptocurrencies. The form only allows complaints about money transfers.

 What do you think would be a fair resolution to your issue?:

The CFPB can resolve this issue by releasing a press release explaining cryptocurrencies are more safe than credit cards and promise to end billions in credit card fraud annually. With
cryptocurrency, as with cash, consumers do not expose their the personal identity information, credit card number or PIN. This information is not transferred, processed, and stored and thus can't be stolen and abused by third parties. Credit card fraud, where not only personal identity of the owner is stolen, but also the credit card information is stolen with it, is rampant when purchasing goods and services. This incurs a financial barrier of compliance costs and liabilities on small business related to processing and storing credit card information. 
Large retailers are increasingly victims of data security breaches. Target had more than 1 million customer records stolen, including credit card information. Smaller retailers are less able to
prevent data security breaches.  A 2013 ITRC survey shows that 15.6% of all data breaches expose credit card information.  
Futher, the credit card system was designed in the 1960's and was never intended for use on the internet. The Internet is a public network where the transmitted data is easily visible to unknown third parties. Recent revelations that SSL (the security layer used on websites) was compromised by spy agencies adds another level of concern with regard to the use of credit cards over the internet.
Lastly, if someone somehow gains access to a cryptocurrency wallet, it is strongly password encrypted, unlike a credit cards or cash.

Feel free to use this text, or improve it and submit further mocking complaints with the CFPB: click here

The fact that the US Government is the largest holder of bitcoin in the world, did not make it into this complaint.  Oops. Click here to see their wallet.


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