California Financial Agency Seeks Weight Through Crypto Influencers

(Reuters) – California’s consumer credit regulator is looking to work with cryptocurrency influencers to gain visibility as the agency handles a growing number of consumer complaints related to digital assets.

California lawmakers last year revamped the state’s Department of Financial Protection and Innovation (DFPI) and gave it authority over previously unregulated consumer financial services. They also tasked DFPI with fostering “responsible innovation” in fintech, including cryptocurrency.

In March, DFPI solicited bids for a contract to raise awareness of the work, including paying “cryptocurrency influencers” to spread the word.

The effort comes amid an increase in consumer interest in cryptocurrencies, as well as complaints from individuals about fraud and other issues.

California allows the cryptocurrency industry to operate in a regulatory gray area because it has not determined whether cryptocurrency services fall under its rules for money transmitters. Individual companies can obtain opinion letters from the DFPI allowing them to operate without a licence.

The agency received 326 complaints about cryptocurrency products or services between Jan. 1, 2021 and Feb. 14, 2022, an agency spokesperson said in response to inquiries from Reuters.

Plaintiffs reported losses totaling $7.75 million due to scams, fraud or compromised accounts, and an additional $2.26 million due to accessibility issues, account freezes or delays in treatment. The DFPI said reported losses were “significantly higher” than for other types of complaints.

The agency has yet to use its new consumer protection authority to take action against a cryptocurrency company, a DFPI spokesperson confirmed. It can refer complaints of fraud to the criminal authorities.

Commissioner Clothilde Hewlett said the agency “is leading the way in promoting responsible financial innovation, which includes taking all complaints of consumer harm seriously.”

“We have had productive conversations with companies offering cryptocurrency services and will continue to ensure that consumers are treated fairly,” she said.

Coinbase and Binance made up the bulk of crypto complaints to DFPI, with Coinbase at 29% and Binance at 17%. No other company was named in more than 4% of complaints, the agency said.

A Coinbase spokesperson said the exchange uses extensive security measures and educates its customers to avoid scams.

A Binance US spokesperson said the company takes complaints seriously and “always works to ensure a positive customer experience.”

(NOTE: This story has been updated to correct the name of the DFPI Commissioner to Clothilde Hewlett.)


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Louis R. Hancock