The need to educate consumers about the risks and costs inherent in crypto currency investments was emphasized Thursday during remarks by the top national banking regulator before the Treasury-led Financial Literacy and Education Commission (FLEC).
Michael Hsu, acting comptroller at the Office of the Comptroller of the Currency (OCC), told a public meeting of the commission that the population of crypto owners is “younger, more financially vulnerable, and more diverse” than the general population. He also cited a “high and growing” risk of scams and hacks in the crypto market. For example, he noted that in 2021 crypto theft hit $3.2 billion, up 516% over 2020. The greatest risk comes from scammers, in particular those engaged in romance ploys, blackmail scams, and high-profile hacking schemes. “The biggest threat in 2021 was so-called rug pulls, whereby legitimate-looking crypto projects were used to attract then steal $2.8 billion,” he said.
Finding “neutral, trusted” source of information on crypto is also difficult, he said, noting the dominant forms of information are marketing materials and misinformation.
“All of the major crypto exchanges and platforms have slick so-called educational materials, which are geared towards onboarding new customers. PayPal, CashApp, VISA, Robinhood, and a host of other financial service firms now offer and actively market crypto ‘access’ to their users (who would be well-served to read the fine print),” he said in his prepared remarks.
Hsu said FLEC’s MyMoney.gov website – a consumer financial education site – does not currently feature information about cryptocurrencies but noted the effort by Treasury to encourage the FLEC agencies – 19 in additional to Treasury, including federal financial institution regulators and the Consumer Financial Protection Bureau (CFPB) – to improve crypto literacy and education.
“I am a strong supporter of this initiative and believe a good place to start would be adding neutral, trusted materials to MyMoney.gov that consumers, educators, and others can use to learn about crypto in an unbiased way and improves their awareness of the risks,” he said.
“Like any risky investment, crypto is not for everyone. It is also not going away,” he said. “One in five adults now has exposure to crypto – as many as have exposure to fixed income investments. We must move quickly to improve the crypto literacy of consumers.“
Remarks of Acting Comptroller Michael J. Hsu to the Financial Literacy and Education Commission’s Public Meeting “Crypto Literacy and My Money Five” – (March 8, 2022)