1.15 - Federal Trade Commission (FTC)

Previous1.14 - National Credit Union Administration (NCUA)Next1.20 - U.S. Dep't of the Treasury

Last updated 2 years ago

Was this helpful?

1.15 - Federal Trade Commission (FTC)

Overview

The Federal Trade Commission (FTC) has a dual mandate to enforce U.S. antitrust law and to protect consumers. Its work in crypto to date has been limited almost entirely to consumer protection.

To that end, it has issued a number of alerts and warnings to consumers and businesses about fraudulent practices related to cryptocurrency, and has initiated several enforcement actions involving fraudulent cryptocurrency schemes. It also tracks consumer complaints related to cryptocurrency, and that effort led it to find consumers had reported over $1 billion in losses and were defrauded using cryptocurrency more than any other payment method.

Despite relatively limited involvement in crypto regulation and enforcement to date, the FTC may be preparing to take a more active role. In March, one high ranking member of the FTC commented that there are "serious red flags" with cryptocurrency that is leading the agency to use all of its tools to protect consumers from the "scourge of crypto-related fraud."

Guidance

With a single exception, the FTC has focused on its consumer protection mandate when issuing guidance in the form of blog posts and consumer alerts.

Antitrust

First the exception: an informal request to the FTC on the related to cryptocurrency holdings for antitrust purposes, and the FTC's equally informal guidance in response. The response was so simple it may as well be repeated in full. An unknown individual wrote in to ask the following question:

I am writing to confirm that the acquisition of crypto currencies (such as bitcoins) is not HSR reportable because they would be considered exempt cash equivalents. Please confirm.

To which the FTC responded simply:

Confirmed.

FTC, (2018.05.17).

Consumer Protection

The FTC's consumer protection efforts have been focused on fraud, warning consumers about fraud, and the impact of fraud on consumers.

Other articles and blog posts of note covered the areas of investments, payments, and donations, all of which the FTC found to be ripe areas for for fraud:

Investment

Payments

Donations

Enforcement

More recently, the FTC stopped a pyramid scheme in which the promoters

promised participants could earn large returns by paying cryptocurrency such as bitcoin or Litecoin to enroll in schemes marketed under the names Bitcoin Funding Team and My7Network. . . . claiming, for example, that Bitcoin Funding Team could turn a payment of the equivalent of just over $100 into $80,000 in monthly income.

Statements & Testimony

Regarding crypto's financial innovations, that "there are serious red flags that should concern us all." Id. at 1.
That the "FTC is using all of [its] tools to protect American consumers from fraud involving cryptocurrency: consumer education, law enforcement, rulemaking, and penalty offense notices." Id. at 2.
That the FTC has "sent Notices of Penalty Offenses to 1,100 businesses — including crypto industry firms as well as coaching firms that purportedly teach their clients how to earn money trading and investing in crypto currency," and that the FTC may seek more than $45,000 per violation. Id. at 2–3.
That "[c]onfronting the scourge of crypto-related fraud truly requires an all-hands-on-deck effort." Id. at 3.

At the same time, Levine's statements come in the context of the FTC finding that 40% of social media losses were paid via cryptocurrency and that consumers had lost over $1 billion to fraud involving cryptocurrencies since 2021, and that as of the end of 2021, "more people reported fraud losses using cryptocurrency than any other method of payment." Id. at 1–2, 3.

Those remarks follow a nearly five year silence on statements of this kind. What came before was part of a forum hosted by the FTC on Artificial Intelligence and Blockchain. Given the age of those remarks they are likely to have limited relevance, but are linked below for the sake of completeness.

Rulemaking

The rulemaking that Samuel Levine referred to in his remarks above involves two rules that are not tailored to crypto per se, but target some of the more rampant forms of fraud used in crypto fraud schemes.

Index of Sources

Sources are listed in reverse chronological order.

Authors

Previous1.14 - National Credit Union Administration (NCUA)Next1.20 - U.S. Dep't of the Treasury

Last updated 2 years ago

Was this helpful?