This past Monday the June 22nd the FTC Commission published a blog posting warning consumers about the use of bitcoins and other virtual currencies. The FTC states that the warning should be a call to action for those accepting or facilitating the acceptance of bitcoin and other virtual currencies in consumer transactions.
The June 22 posting, titled “Before paying with bitcoins. . .” published on the FTC’s Consumer Information blog is intended to warn consumers about the risks of paying for goods and services with bitcoin. The post goes on citing bitcoin’s price volatility, the irreversibility of bitcoin payments, including the lack of clarity of costs, the vulnerability of the system to scammers and hackers and the lack of recourse for lost or stolen funds along with the lack of legal protections for such payments.
The posting also states the FTC has received hundreds of complaints related to bitcoin and other virtual currencies. The two complaints cited most frequently were merchants that did not deliver the product on time or at all and merchants who gave refunds only in store credits, and not currency. At the same time, the CFPB announced that consumers could file complaints related to virtual currencies using the CFPB’consumer complaint database.
The message is clear: FTC staff will keep a close watch to poorly-disclosed merchant refund and return policies and privacy policies of both merchants and virtual currency businesses that do not fully disclose how the consumer’s information will be used and shared.
The blog post makes clear that the FTC believes it is very important consumers be made fully aware of all of the material terms of the merchant’s return and refund policies since these payments do not enjoy the same legal protections as credit card payments. At a minimum, the FTC expects disclosure of how much money will be refunded, the type of currency in which the refund will be paid and how the refund will be processed.
The Blog’s advice to consumers is expected to serve an important guidance on FTC staff expectations for businesses providing cryptocurrency-related products and services or merchants accepting bitcoin to facilitate such merchant transactions. However, it can also be seen as a menace to digital currencies.