A timely warning from the feds: Bitcoins are the ‘Wild West’

The Consumer Financial Protection Bureau, that whipping boy of big-business conservatives everywhere, demonstrated its value to the average consumer this week by explaining the pitfalls of bitcoins and other such “virtual currencies.” The key takeaway, in the succinct words of CFPB Director Richard Cordray: “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.” The agency underscores several risks in the use and trading of bitcoins that experienced participants generally know all about, but could trap the unwary--precisely the people the CFPB was created to look out for. --Customers may not have recourse: “Some virtual currency companies do not identify their owners, provide phone numbers and addresses, or even specify the country in which they are located.,” the CFPB says. To their credit, some bitcoin promoters accepted the CFPB statement as a positive development; anything that adds to the virtual currency’s legal validity can only expand its customer base. Bitcoin Foundation General Counsel Patrick Murck called the CFPB warnings “reasonable.” He told Politico, “I didn’t see anything objectionable in these warnings.