Aug 30, 2022 - Economy & Business

Lawmakers launch fact-finding mission in bid to protect consumers

illustration of a flashlight like looks like capitol hill dome
Illustration: Sarah Grillo/Axios

Lawmakers, in a bid to enhance consumer protection, are asking government agencies as well as major crypto exchanges for more information about what they're doing about cryptocurrency-related fraud.

Why it matters: The House Oversight Subcommittee on Economic and Consumer Policy has used its heft in Washington to press companies for information on everything from metals toxicity in infant formula to advertising practices for e-cigarettes. The latest ask — all documents pertaining to crypto fraud dated January 1, 2009 (or the earliest date per the firms' respective founding dates), are due by Sept. 12.

What's happening: "Given the growing popularity of cryptocurrencies both as a form of payment and as an investment, I am concerned by the rapid growth of fraud and consumer abuse," Rep. Raja Krishnamoorthi (D-Ill.), the chair of the subcommittee, said in letters addressing government agencies as well as major exchanges.

  • The letters were sent Tuesday to Treasury Secretary Janet Yellen, U.S. Securities and Exchange Commission chair Gary Gensler, the Federal Trade Commission's Lina Khan, the Commodity Futures Trading Commission's Rostin Behnam as well as leaders of major crypto exchanges at Coinbase Global, FTX US, Binance, Kraken and KuCoin.

Details: Krishnamoorthi cited the FTC's estimate that losses from crypto scams are on track to surpass $1 billion this year.

  • "I am also concerned by the apparent lack of action by cryptocurrency exchanges to protect consumers conducting transactions through their platforms," he said.
  • Coinbase, FTX US, Binance and Kraken did not immediately respond to requests for comment.

Of note: The congressman is a member of the Congressional Blockchain Caucus, a bipartisan group formed to bring together industry and lawmakers to study blockchain technology.

Context: The subcommittee's fact-finding mission comes amid a slate of reports due out soon per President Joe Biden's executive order in March that, among other things, put top consumer watchdogs FTC and the Consumer Financial Protection Bureau to task on how to police crypto transactions.

  • The CFPB in May issued an enforcement memorandum, addressing deceptive practices including misuse of the Federal Deposit Insurance Corporation logo or misrepresenting deposit insurance coverage.
  • Meanwhile, the FTC has homed in on crypto scams and stepped up publishing crypto educational materials.

The other side: Many of the largest crypto exchanges, for their part, have been engaged in publishing educational materials in blog posts, tweets and entire sites dedicated to detailing the finer points of digital assets investing.

  • FTX launched "Get to Know Crypto" just this month.
  • Coinbase Global just rolled out a voter registration tool saying it was part of a "as part of a broader education initiative" in a blog post last week and has an explainer on all the different ways scammers might target them.
  • Binance also has a how-to on identifying and avoiding crypto scams and offers personal finance tips.

The bottom line: "By implementing audit policies, requiring certain disclosures, delisting, and adopting other safety mechanisms, cryptocurrency exchanges can—and should—create safer environments for consumers," Krishnamoorthi said.

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