The United States Government Accountability Office or GAO has presented a report
wherein it says that though virtual currencies are financial innovations, they pose emerging challenges to federal financial regulatory and law enforcement agencies in carrying out their responsibilities. The detailed report is an outcome of a lot of labor the organization put.
GAO cites several examples why the CFPB should take steps to identify and participate in pertinent interagency working groups addressing virtual currencies in coordination with other participating agencies. Reading out the report, it looks many of the points it mentions are obvious and in fact, are special about digital currencies.
GAO Raises Some Serious but Obvious Concerns Regarding Bitcoin and Other Digital Currencies
For instance, the organization says that virtual currency systems may provide greater anonymity than traditional payment systems and sometimes lack a central intermediary to maintain transaction information. As a result financial regulators and law enforcement agencies may find it difficult to detect money laundering and other crimes involving virtual currencies.
The report also says that as many virtual currency systems can be accessed globally to make payments and transfer funds across borders. It could be difficult for law enforcement agencies investigating and prosecuting crimes that involve virtual currencies as for that they would need to ask for cooperation from international partners who may operate under different regulatory and legal regimes.
Instances like the Collapse of Mt. Gox, a Bitcoin Exchange is a Major Concern
Citing the example of Mt. Gox collapse, GAO says that the emergence of virtual currencies has raised a number of consumer and investor protection issues. For instance, it says that the reported loss of consumer funds maintained by Bitcoin exchanges, volatility in Bitcoin prices, and the development of virtual-currency -based investment products.
The report says that Mt. Gox filed for bankruptcy after reporting that it had lost more than $460 million. Later on, the Federal financial regulatory and law enforcement agencies took a number of actions regarding virtual currencies as well. Thus, according to GAO this aspect should be kept in mind when drafting a policy for crypto currencies.
Nonetheless, as illicit activity and security breaches, raising possible regulatory, law enforcement, and consumer protection issues have come up GAO wants that the CFPB, whose responsibilities include providing consumers with information to make responsible decisions about financial transactions, should start working towards ensuring consumer protection.
To contact the reporter of this story: Deepak Tiwari at firstname.lastname@example.org