Hot Takes

We got a data dump of all the complaints about "virtual currency" filed with the CFPB.

This was thanks to a Freedom of Information Request filed by Muckrock News.

A first glance at the data left us scratching our heads. According to the CFPB response, there were a total of 5,177 complaints filed from 2011 to the end of 2015. Of those, the top ten companies complained about were:

  1. Western Union Company - 1,003 complaints
  2. MoneyGram - 784 complaints
  3. PayPal - 435 complaints
  4. Bank of America - 193 complaints
  5. Wells Fargo - 167 complaints
  6. JP Morgan Chase - 155 complaints
  7. Citibank - 71 complaints
  8. Ria - 42 complaints
  9. Walmart - 39 complaints
  10. PNC Bank - 11 complaints

Those are obviously not digital currency firms. So we took a look at the CFPB’s online complaint form and discovered that the agency has not yet developed a form specific to virtual currency complaints and therefore lumps in virtual currency complaints with complaints about traditional money transmission (see screenshot below). When the CFPB responded to the FOIA request asking for virtual currency complaints, the overwhelming majority of complaints they returned were therefore not related to “virtual currency”.

So, we went through the data, cleaned it up, and then marked all those firms that we could recognize as clearly related to digital currency. What we found is that there was only a grand total of 37 complaints against "virtual currency" companies over the five-year period.

Coinbase took pole position with 10 complaints, which makes sense given the large number of customers they have. “Bitcoin” itself had two complaints lodge against it. GAW Miners had four complaints, Bitcoin Trader three, and Butterfly Labs two. After those, the rest only had one complaint each, and they are as follows: Bitfinex, BitInstant, Bittrex, Blockchain, C-Cex.com, CampBx.com, CoinMX, igot, Local Bitcoins, minerslab, Moonasics, MtGox, PERBTC, Purse, and Terabox. Many of these will be recognizable as known scams, and we have previously explained why there are so many Bitcoin scams.

In August 2014 the CFPB announced that “consumers who encounter a problem with a virtual currency product or service can now submit a complaint with the Bureau.” No doubt the agency wanted to see how widely consumers were being affected by the risks it had previously identified with digital currency. It’s remarkable, then, that in five years of data there have been so few complaints, and that so many of the products and services in the space are completely absent. Let’s keep it up.

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Keeping track of the cryptocurrency bills in Congress.

As part of our work to keep cryptocurrency networks open, decentralized, and permissionless, Coin Center tracks the introduction and current status of federal legislation that mentions, or relates to, cryptocurrencies. During the first months of the 116th Congress, we have identified 11 such bills as having been introduced in either the House of Representatives or the Senate.

As a resource to those interested in public policy and the regulation of cryptocurrencies, we have decided to make our “Crypto Bills Tracker” publicly available. We will be periodically updating it as bills are introduced and move through the legislative process, and hope it will serve as a useful resource for the cryptocurrency community.

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Coin Center files comment in CFTC proceeding on Ethereum

A few months ago LabCFTC, the division of the agency dealing with innovative financial products, put out a request for information to better understand the Ethereum network and ecosystem that has developed around it. We have submitted a formal comment explaining what Ethereum is and how it works relative to other public blockchain networks like Bitcoin. Issues covered include smart contracts, consensus mechanisms (current and planned), governance, etc.

You can read the full comment here.

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We demonstrated the Bitcoin Lightning Network in Congress.

Earlier today, Coin Center hosted a briefing in Congress in conjunction with the Congressional Blockchain Caucus. We covered the basics of cryptocurrency, why it’s exciting, and went through some the policy issues the technology raises, including questions of scaling, privacy, consumer protection, and tax.

One of the things made uniquely possible by cryptocurrency is microtransactions--tiny transactions without a middleman. To visualize this concept, we used a lightning enabled candy dispenser. We were able to show the process of sending tiny amounts of bitcoin from our phones to the vending machine and watch it dispense candy in real time. The network fees were 1 satoshi per transaction.

Real time demonstrations like these are always better than simply describing a process. We are grateful to Swiss developer David Knezić for generously donating the dispenser to Coin Center.

The well-attended briefing was the first of many that the Congressional Blockchain Caucus plans to hold in 2019. We are excited to continue helping them and their colleagues better understand and appreciate this technology.

Here are the slides from our presentation:

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New York is creating a cryptocurrency task force. We encourage them to reevaluate the BitLicense as part of their work.

As any cryptocurrency entrepreneur will tell you, getting a BitLicense is difficult and costly. Not only that, but as written the regulation has grey areas relating to custody, requires state approval before a company can add new products or services, and very few licenses have been issued.

The result of this is that many cryptocurrency businesses are choosing to simply forgo doing business with customers in New York.

We are glad to see the New York legislature taking the step of creating a task force to better evaluate the cryptocurrency landscape and its own regulatory stance toward the technology, which is well overdue. As Assemblyman Clyde Vanel noted, “It has been nearly four years since the implementation of the BitLicense. In the cryptocurrency space and technology in general, a few months is equivalent to years.”

We look forward engaging with the task force on this important mission.

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A bill that would clarify securities law for tokens and improve the tax treatment of cryptocurrencies was just introduced in Congress.

Today, Reps. Warren Davidson and Darren Soto introduced the Token Taxonomy Act, which includes several common-sense changes to federal law.

First, the bill would amend the definition of “security” in the Securities Act of 1933 and the Securities Exchange Act of 1934 to exclude decentralized cryptocurrencies such as Bitcoin, thereby making clear that such cryptocurrencies are not subject to the rules and regulations of the U.S. Securities and Exchange Commission. We have longargued that classifying decentralized cryptocurrencies as securities would be both impractical and harmful to innovation, a view that the SEC has, to its great credit, also recently taken. Although the SEC has put forth sensible guidance on this question, codifying that decentralized cryptocurrencies are not securities would mitigate any lingering uncertainty.

The bill would also make several changes to the tax treatment of cryptocurrencies. One such change that we have long argued for is a de minimis exemption for cryptocurrency transactions for goods and services. Today, if you buy a cup of coffee with bitcoins and the price of bitcoin has increased since you acquired it, you would have to calculate, report, and pay taxes on any capital gains that you realized as a result of the transaction, no matter how small they might be. The Token Taxonomy Act would create an exemption from this requirement for any gains under $600, similar to the de minimis exemption that foreign currency transactions enjoy today, which we think is a simple and fair way to avoid unfairly discouraging the use of cryptocurrency as a means of payment.

We are happy to see continued action from Congress to implement common-sense clarifications and adjustments to the regulatory treatment of cryptocurrencies. We are looking forward to continued engagement with policymakers on these issues to ensure that the fruits of cryptocurrency innovation are not lost to ill-considered policy.

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The next Coin Center Annual Dinner will be on May 13, 2019

Save the date! Blockchain’s night out is back. We will be returning the the magnificent ballroom of the Plaza Hotel in New York City after the first night of Consensus 2019.

Join us for a evening of food and drink with the best of the cryptocurrency industry, all while supporting Coin Center’s critical policy advocacy mission.

Monday, May 13, 2018 - 7:00 PM

The Plaza Hotel

768 5th Avenue, New York, NY 10019

Individual tickets will be available in early 2019.

You can see pictures from past dinners here.

For table sponsorship opportunities contact antonie@coincenter.org.

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Two new digital asset associations launch to advance cryptocurrency professionalization.

Over the last week, The Association for Digital Asset Markets and Mexican Blockchain Association both launched. Their goals are to develop industry standards, codes of conduct, and best practices among companies working with public blockchain networks.

You can read ADAM’s founding principles here and about the Mexican Blockchain Association (in Spanish) here.

It is great to see cryptocurrency industry participants increasingly work together to improve their standards and build an orderly cryptocurrency ecosystem. We are looking forward to working with both organizations.

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Based in Washington, D.C., Coin Center is the leading non-profit research and advocacy center focused on the public policy issues facing cryptocurrency and decentralized computing technologies like Bitcoin and Ethereum. Our mission is to build a better understanding of these technologies and to promote a regulatory climate that preserves the freedom to innovate using permissionless blockchain technologies.