Almost each consumer financial service and product is looked upon by the Consumer Financial Protection Bureau (CFPB). The CFPB has decided that it will divert its attention to virtual currencies that are working as a type of electronic capital.
This week it sent a statement telling people about digital currency dangers like XRP, Dogecoin and Bitcoin. It reported that these currencies do offer a type of innovation; however they have issues which must be resolved. This statement also told people that these risks should be taken into account before dealing with digital currency.
It stated these risks which included investor protection that was limited to an extent, fraud, hackers and cost.
The statement that followed this directed the attention of people to a whole different level of worry. It said that currencies were not actually real money and the U.S. along with other governments and the central bank do not back them up.
The Director of the CFBP, Richard Cordray, stated afterwards that the consumers are entering a difficult area by engaging in this market.
Previously, there were concerns with the banking industry pre-Fed. However, this was due to weak rules and policies at the time. The prohibitions that branch banking went through are a good example. The financial system was unstable at the time as well because it tied every success of the banks to the local economy.
These problems led to currency shortages in different seasons. Even though this problem was so severe, it wasn’t the real issue. It is shown by historical records that individual currencies of different banks were sort of a plus point.
The Federal Reserve debated over allowing banks to issue individual currency over government bonds and at times, over each banks general assets.
In Congress, there was uproar for a monopoly in the government considering this issue. Reform proposals were looked upon, but every plan influenced the matter at hand. This reform debate continued for about ten years and in 1908, the Aldrich-Vreeland Act was passed. In the pre-Fed era, this act was changed in order to allow the issue of emergency currencies. Around $375 million was issued for over 2,000 U.S. banks. This ended a colossal chaos.
The notes were used to pay depositors and encourage payments through inter-banks. They were issued against general assets in the banks.
Some think that the Federal Reserve would not have formed in 1913 if these events had not occur near the year 1908. The success of the Aldrich-Vreeland Act showed that allowing banks the issuance of independent currency for their assets, irrespective of bond requirements, may mitigate the banking problems of the state altogether.
However, this was so late that it couldn’t alter the Federal Reserve Act at all.
It is currently a whim that people, who are aware that one currency that is government-backed is beneficial in the U.S., will also invest some of their time to evaluate their knowledge of digital currencies.