California’s consumer financial protection department has been working with cryptocurrency influencers to raise awareness of its mandate, as it fields mounting complaints related to cryptocurrencies.
The Department of Financial Protection and Innovation issued tenders last month, hoping to draw from the expertise of social media stars in raising public awareness about its work.
It was only last year that California legislators tasked the DFPI with overseeing previously unregulated consumer financial services. In addition to fostering “responsible innovation” in financial technology, the DFPI is also responsible for cryptocurrency oversight.
The cryptocurrency industry in California has been operating within a regulatory gray zone, as the consumer protection department has still not determined whether crypto services fall under its remit regarding money transfers. Currently, individual companies can solicit opinion letters from the DFPI, which then enables them to operate without a license, but the state financial regulator has been receiving an increasing number of complaints related to digital assets.
“We have had productive conversations with companies offering cryptocurrency services and will continue to ensure that consumers are treated fairly,” said Commissioner Cloth Hewlett. She added that the agency “is leading the way in fostering responsible financial innovation, which includes taking seriously all complaints of consumer harm.”
From the beginning of last year until February 14, 2022, the agency received 326 complaints about cryptocurrency products or services. According to the DFPI, reported losses were “substantially higher” than for other financial products. Losses from scams, fraud or compromised accounts amounted to $7.75 million, while accessibility issues, account freezes or processing delays cost consumers another $2.26 million. The agency has yet to take action against any crypto companies regarding the complaints, although a spokesman said it could refer fraud complaints to criminal authorities.
According to the DFPI, the majority of complaints were made against US cryptocurrency exchange Coinbase, and its international rival Binance. While Coinbase made up 29% of complaints and Binance 17%, the agency reported that no other company had been named in more than 4% of complaints. In response, a Coinbase spokesman highlighted the exchange’s extensive security measures and its efforts to educate its customer about avoiding scams, while a Binance US spokesmen acknowledged the complaints, saying it is “always working to ensure a positive customer experience.”
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