California finance agency seeks clout via crypto influencers

REUTERS/Dado Ruvic
  • Agency wants to encourage "responsible innovation" in fintech
  • It has received crypto complaints totaling $10 million in losses

(Reuters) - California's consumer finance regulator is seeking to work with cryptocurrency influencers to gain visibility, as the agency fields a mounting number of consumer complaints related to digital assets.

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

In March, DFPI sought bids on a contract to raise public awareness of that work, including by paying "cryptocurrency influencers" to spread the word.

The effort comes amid an uptick 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 zone as it has not determined whether cryptocurrency services fall under its rules for money transmitters. Individual companies can get opinion letters from DFPI allowing them to operate without licenses.

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.

The complainants reported losses totaling $7.75 million from scams, fraud or compromised accounts, and another $2.26 million from accessibility issues, account freezes or processing delays. The DFPI said the reported losses were "substantially higher" than for other kinds 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 fraud complaints to criminal authorities.

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

"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, Coinbase with 29% and Binance with 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 on avoiding scams.

A spokesperson for Binance US said the company takes complaints seriously and is "always working 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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Jody Godoy reports on banking and securities law. Reach her at