CFPB cites fraud as No. 1 crypto complaint, signaling trouble ahead

The Consumer Financial Protection Bureau released a timely report about crypto assets and skyrocketing consumer complaints about virtual currencies and tokens, an indication of problems ahead for the imploding cryptocurrency industry. 

The CFPB report, released Thursday morning, laid out in stark terms why consumers have difficulty obtaining any restitution for lost crypto funds. When consumers have been defrauded or had accounts hacked, they often have nowhere to turn for help. Consumers often have no way to identify the owners behind many crypto-asset addresses, the CFPB said.

"Bad actors are leveraging crypto-assets to perpetrate fraud on the public," CFPB Director Rohit Chopra said in a press release accompanying the report. "Americans are also reporting transaction problems, frozen accounts, and lost savings when it comes to crypto-assets."

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The report comes on the heels of a recent rout in cryptocurrencies and follows the collapse of a major deal between rival cryptocurrency trading platforms Binance and FTX.com. The drama led Rep. Patrick McHenry this week to call for increased regulation of digital assets and cryptocurrency trading platforms. 

Businesses ranging from credit card providers to banks have pushed bitcoin and other virtual currencies into the mainstream by offering customers more options to buy, sell and make payments with digital assets. The CFPB stated that "price volatility" and adoption of crypto assets have increased in recent years. 

Most cryptocurrency exchanges are regulated at the state level through money transmission licenses but have little to no federal oversight. Though many crypto businesses are registered with the Financial Crimes Enforcement Network, many crypto skeptics claim they are not following anti-money-laundering rules issued by Fincen.

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Poor customer service was a common theme of complaints to the CFPB. Since many crypto-related businesses provide no customer service, the CFPB said that attackers often pretend to be a customer service representative to gain access to a customer's account. Fraud is vexing regulators as well, the CFPB implied in its commentary. 

"There are a number of techniques scammers use to obscure the movement of crypto assets to other accounts," the CFPB said in the press release. "This can make tracing crypto assets stolen by fraudsters more time consuming for regulators and law enforcement."

The bureau said "hacks by malicious actors" have led to significant financial loss by consumers "with no recourse for recovering stolen funds." Chopra also cautioned that consumers "should be wary of anyone seeking upfront payment in crypto assets," noting that such solicitations "may be a scam."