Director Chopra’s Prepared Remarks to the Financial Literacy and Education Commission
Good morning. It’s a pleasure to be with many of you in person today.
The collapse of the Bahamas-based crypto-asset firm FTX.com has created serious turmoil in the crypto-asset markets. We are witnessing the significant interconnections in crypto-asset markets, and how contagion tends to spread quickly throughout crypto markets.
FTX’s failure isn’t the first-time customers of crypto platforms haven’t been able to get their assets out or withdraw their US dollars. Over the summer, several crypto-asset firms also froze customer assets and ultimately failed.
Thankfully, interconnections between crypto markets and the traditional financial system remain limited. These massive blowups underscore the need to scrutinize any attempts to further integrate crypto markets with banks and other institutions with taxpayer backing.
Last week, the CFPB released a detailed analysis of consumer complaints related to crypto-assets. Among the major takeaways were:
- Complaints about frozen assets and failed platforms, transaction issues, or inadequate or nonexistent customer service.
- The prevalence of scams and frauds, including so-called "pig butchering" and romance scams. About 40% of crypto-asset complaints handled since October 2018 listed frauds and scams as the main issue. In the past, scam artists used gift cards and other payment instruments. Crypto is now a major vector for fraudsters to perpetrate crime.
The bulletin also included a list of risks and tips for consumers to help avoid fraud and other pitfalls.
Americans need to have confidence in payments, and their ability to access their accounts, whether it’s debit, credit, cash, prepaid, or something else. Many Americans are learning that their reasonable expectation of withdrawing their assets from the investment or transaction account in crypto-asset markets have not been met.
A central role of financial education is to help consumers spot pitfalls, assert their rights and find help if something goes wrong. Frauds and scams are also rising in the consumer payments ecosystem writ large, as peer-to-peer apps and other real-time payment rails grow in popularity.
While the bulk of the crypto-asset ecosystem involves speculative trading that would not be considered a consumer financial product or service, the CFPB is watching these developments closely, given the potential for stablecoins and other digital assets to enter the consumer payments system.
Since stablecoins and other crypto-assets could scale through an established network, we have issued a series of orders to Big Tech companies and other peer-to-peer payments platforms to collect information about consumer protection, privacy, and fair competition.
The CFPB issued guidance making clear that firms cannot misuse the name or logo of the FDIC or make deceptive representations about deposit insurance, in conjunction with FDIC rulemaking.
We will continue to serve as a key intake valve through our consumer complaint system, which is one of the most used resources in the federal government for Americans to seek help on financial concerns. We share these complaints with regulators and enforcers throughout the country, and we encourage the public to visit consumerfinance.gov/complaint if they’re struggling to resolve an issue.
Finally, we have seen the enormous amount of money deployed into marketing by crypto firms, including Super Bowl ads and targeted digital campaigns. When the public does not have easy access to unbiased information with nowhere to turn for help, there can be serious problems. We look forward to working with other agencies to implement the FLEC recommendations from Digital Asset Executive Order report, which will help address this gap.