Consumer complaints have increased over the past few years due to growing market volatility, which has affected not only cryptocurrency exchanges but also traditional financial institutions such as JPMorgan Chase & Co. and Wells Fargo & Co.
The Consumer Financial Protection Bureau, in an effort to monitor consumer complaints in the cryptocurrency market and under a presidential executive order to "combat unfair, deceptive or abusive practices," confirmed 2,734 complaints against cryptocurrency-related consumer digital asset-focused companies. According to an analysis of data by Dynamic Securities Analytics Inc., a compliance data company based in Tampa, Florida, from January 1, 2020 to August 26, 2022 in its database. More than 1,800 of them came in the last calendar year alone.
Consumer complaints about CFPB cryptocurrencies range from scams and fraud to the inability to withdraw funds. Companies involved include crypto-natives Binance.US, Coinbase Global Inc., Gemini Trust Co. and Block Inc., JPMorgan, Wells Fargo, and PNC Bank NA, traditional financial institutions, among others. .
While complaints about crypto products and services still represent only a small portion of the overall volume of reports received by consumer financial regulators, the overall upward trend suggests that concerns about consumer complaints may drive more regulation of cryptocurrencies. Until now, the industry has received less attention from regulators than areas such as investor protection and market integrity.
The CFPB uses complaints to inform regulatory and enforcement actions and shares data with other agencies and law enforcement agencies, such as the Federal Trade Commission and the FBI. The agency has not yet indicated whether it intends to act on the cryptocurrency-related complaints it has received.
Transaction issues topped the list of complaints, including apps not working or problems making requests. According to the data, about 28% of complaints are related to cryptocurrency-related scams or scams, while another 20% are related to unavailable funds. Consumers also reported to the agency other problems with credit reporting, debt collection, mortgages and student loans.
Established in 2012, the Public Complaints Registration dataset aims to provide transparency and real-time information to help the public understand broader industry trends. Since CFPB carriers are named in complaints to be given an opportunity to respond, they publish reports detailing specific issues consumers face, with little personally identifiable information.
Alison Jimenez, founder of Dynamic Securities Analytics, said the analysis shows that "not all cryptocurrency-related complaints are related to cryptocurrency companies," which are also called banks and other traditional financial services firms. This complaint about cryptography. He exchanges Coinbase, Gemini and Binance. The United States received the largest number of complaints, and complaints about cryptocurrency companies were related to other financial products, such as credit cards, as well as sending and receiving money.
"It's a good starting point to do more research and add deeper questions about what's going on in these companies," he said of the analysis.
It remains to be seen how the CFPB will seek to clarify its cryptocurrency regulatory authority now that some firms may demand accountability, said Kathy Craninger, a former CFPB director in the Trump administration. Consumer Protection Authority. He said other agencies, such as the Securities and Exchange Commission, have jurisdiction to protect investors, and the Justice Department and state attorneys general also work on fraud and corruption cases. "Who has priority, which organization has the best authority, is an important aspect here," he said.
But for crypto companies, said Ms. Kraninger, who is now vice president of regulatory affairs at the Solidus Labs crypto compliance platform, it's important to engage responsible actors in the crypto ecosystem with bad players. He added that the industry now has monitoring tools to look for issues like malicious code, market manipulation and money laundering in smart contracts, which companies should use to report fraud and educate consumers.
Additionally, cryptocurrency companies should review their information to ensure they are not providing consumers with misleading information about the products they deal with, the risks of those products, and the information that security agencies may provide.
"It's one of those things that traditional finance, including disclosing [what risks] are to customers," he said. "There are companies that do and should do that ... it's the peace of mind that investors are looking for."
Write to Mengqi Sun at mengqi.sun@wsj.com
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