The mainstream media likes to portray virtual currency as a nefarious actor in the financial world. Juicy stories are found in events that contain corruption and are ladled with jarring headlines to attract viewership. The media has certainly given a lot of attention to virtual currency situations that contain illegal activity. The Mt. Gox and Silk Road cases brought more awareness to Bitcoin but left it in scrutiny and shadows. As an emerging technology, the term ‘Bitcoin’ has elicited negative connotations from outsiders of the crypto-tech.
Since Bitcoin’s inception, other digitally created currencies have cropped up with virtual currency use increasing despite the negative media attention. Courses on cryptocurrencies are being taught at major universities such as Duke, New York, Princeton, and Stanford. As society gravitates toward a more online, digital-centric world, the use of these currencies may become more customary.
Major companies and banks are also creating consortia, such as R3, to look into the underlying technology of cryptocurrencies: the blockchain. With more widespread adoption, data and reporting agencies are documenting its growing use. In August 2014, the Consumer Financial Protection Bureau (CFPB) had released a consumer advisory warning about the risks of virtual currencies – and included an announcement that consumers could submit virtual currency related complaints with the Bureau. The CFPB was created to protect American consumers when dealing with consumer financial products and services. The CFPB Director Richard Cordray had stated:
“Virtual currencies may have potential benefits, but consumers need to be cautious and they need to be asking the right questions. 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 CFPB provides transparency with 689,000 complaints sent to nearly 3,000 different companies that are available for anyone to analyze, and have included virtual currency in the database. Due to this transparency, student loan marketplace LendEDU has compiled the data and inspected its results for virtual currency complaints, finding:
There are virtually zero virtual currency complaints in the database.
In 2016, there were 7 virtual currency complaints out of the 189,098 total complaints. Virtual currency complaints made up 0.0037% of the total number of complaints.
Of the 7 total complaints, here is the breakdown by Issue:
- 4 complaints filed under “Other service issues”
- 2 complaints filed under “Other transaction issues”
- 1 complaint filed under “Fraud or scam”
In contrast, there were 499 “Fraud or scam” complaints filed in the database under Money Transfers.
Of the 7 total complaints, here is the breakdown by Company:
- 4 complaints filed against Coinbase
- 3 complaints filed against Circle Internet Financial
The Executive Director of the Blockchain Education Network, Dean Masley, told LendEDU:
“It’s the reason banks are terrified. Most gateways are very narrowly designed to be very good at that one use case. At any moment I can move all my coin (virtual currency) from one service to another, without any compatibility issues. When you combine a highly competitive global app market with high compatibility and no friction for users, you get very narrow solutions that focus really hard on being good at that one use case.”
LendEDU’s translation of this explanation is that Masley believes “consumers are having successful experiences with virtual currency companies due to the high competition and excellent technology for consumers.”
In short, if virtual currency consumer complaints remain low, adoption and use will be propelled, which will bolster blockchain application solutions. Despite past misuse, virtual currency may take over payment solutions in the future if it continues to prove its innovation.