Why does the CFPB want to protect teens from cryptocurrencies? – Reason.com
In recent years, the Consumer Financial Protection Bureau (CFPB) has published financial literacy activities for K-12 educators. These papers examine traditional personal finance topics such as loans, taxes, and savings habits. And as cryptocurrencies have become more popular, CFPB has made them into its educational list as well, but only the parts that fit its curriculum.
The resulting activity, “You wonder about virtual currencies,” leans more towards advocacy than education. Besides being selfish (a reflection question ask students to “Write a sentence describing why reviews like this are useful to consumers”), it is overly critical of the current cryptocurrency space.
Edifying cartoon tales figure in the source text of the activity, the advice “Risks for consumers posed by virtual currencies” from the CFPB. “Nicole” lost all of her bitcoin after using a corrupt bitcoin exchange. “James” threw away his private keys and could no longer access his bitcoin holdings. “Kat” and “Larry” lost thousands of dollars when their hosted wallet companies were unwilling to help recover stolen bitcoin. The other risks mentioned range from slightly annoying to really horrible. Despite all these drawbacks, the advantages of cryptocurrencies are little mentioned.
Much has changed since August 2014, when the advisory was last updated. Bitcoin is now trading at around $ 37,000 after hitting a record above $ 63,000 last April, compared to a price of around $ 500 in August 2014. Ethereum, the second largest cryptocurrency, did not exist when the CFPB published the notice. Over the past five years, its price has dropped from $ 12.70 to $ 2,744.52.
Classroom activity warns that few retailers accept virtual currencies as a form of payment and implies that they are not widely used. But these days, more than 15,000 companies I accept bitcoin, and the currency is used in over 300,000 transactions per day. Some 46 million Americans–17% of the adult population now owns bitcoins, study finds led by the New York Digital Investment Group. It doesn’t even take into account the thousands other cryptocurrencies.
However, theft and fraud are common risks depending on the activity of the CFPB. It is true that cryptocurrencies are not legally protected as are assets guaranteed by the government. But “bitcoin theft from unsuspecting wallets has almost completely disappeared,” according to Bitcoin Magazine. Only 0.002% of bitcoin supply was stolen in 2020—A drop of 92% compared to 2019. If these probabilities are still too high, cGenuine holders can keep their virtual assets in “cold storage” wallets, which are offline and more secure.
Despite its efforts, the CFPB did not deter investors. Crypto buyers haven’t seen the agency’s warnings, or they have and just don’t care. Either way, CFPB’s efforts to deter high school students from crypto investing are misguided. Yesyoung people are already capitalizing on their curiosity: nearly one in 10 American teenagers negotiated crypto assets, according to financial services firm Piper Sandler. Over a quarter of Gen Z and Gen Y prefer Bitcoin on stocks as of 2019.
This activity is sole purpose is to do [students] aware of the potential risks associated with investing in virtual currency, “even if the agency is “Investigate the investment“The guide asks students to consider the benefits of various investment products in addition to the costs. For the CFPB, virtual currencies are the only asset class that deserves such close scrutiny.” [other asset classes] are insured by the federal government. “)
Lack of government involvement is often the reason people choose to invest in cryptocurrencies in the first place. In front of rising inflation, these are hedges against a weakening US dollar. Inflation too makes investment vehicles that the CFPB encourages students to consider–like government guaranteed bonds–less lucrative. It should come as no surprise that people are looking for non-governmental solutions.
In addition, young people can benefit from cryptocurrencies. Some University students pay their tuition fees through their crypto investments. The CFPB should empowering students to weigh costs and benefits on their own – a seemingly obvious component of the very financial literacy she aims to teach.