Documents with title alternative dispute resolution ADR in an office.

Bringing customer protection to crypto

One of the best ways to bring legitimacy to a sector sorely in need is to assure participants their rights are protected should a dispute arise.

MyChargeBack helps establish its global vice president of operations, Michael B. Cohen, for cryptocurrency purchases.

MyChargeBack’s roots are in B2C relationships. Unlike the B2B realm, where there are a lot of service providers when dealing with a business, the consumer has few advocates in their corner, Cohen explained.

Over the past decade, MyChargeBack has developed the ability to help customers navigate the dispute resolution process. Along the way, they have also worked with banks, regulators, and the other participants involved in the payments ecosystem to develop a growing network of entities with an interest in fostering a safe environment.

Michael B. Cohen.

The current state of cryptocurrency is fraught with risk, Cohen said. Much activity is domiciled offshore with obscured identities.

Knowing how technologies work and the paths typical payments take has helped MyChargeBack develop an effective system to protect all participants in the payment loop. Its understanding will only improve with time as they add more information.

Map out history

Their system maps out transaction histories while identifying various networks. As more transactions are studied, they can locate typical responsible and fraudulent behavior patterns.

That ability to identify responsible participants, along with those carrying responsibility for making amends, will be crucial as payments providers, tech developers, and other key players seek to attract more people to cryptocurrencies and grow the size of the pie for everyone.

“In terms of who was responsible, it’s real easy to pass the buck, really easy, and our lives are getting crushed,” Cohen said of the current state of much of the crypto world.

Regulation would help, but don’t expect your favorite government agency to arrive on their white horse and save the day, at least not anytime soon, Cohen said.

For the most part, they are clueless, which could lead them to either overstep or go too lightly. He said that outright bans happen because those regulators are incapable of dealing with them. In a way, that makes sense because participants in such regions will suffer less because they never get a chance to participate.

Those who try and work with everyone to develop an effective regulatory environment will likely experience some painful lessons along the way.

International uncertainty

One of the reasons for the current chaos is cryptocurrencies are an international issue, with no consensus on how to deal with them, Cohen said. With it being beyond a country’s typical reach, there is little precedent, which could spawn an unacceptable level of response.

In the meantime, it’s “industry, regulate thyself,” and a big part of that will be creating a practical level of rights to protect the consumer, Cohen said.

“When it comes to consumer rights, where they get screwed, should they have the ability to fight back? Yeah, they should,” he said.

“I believe every consumer who’s been screwed by a merchant also feels they should have some type of recourse at work. It doesn’t mean you have to ban the entire thing because you can’t make a dispute, but this little pond over here, I think they’re a big mess. There’s a big mess, and I think that it’s too big for (government) as they haven’t even done regulation… (but) I think that the crypto will be supported, I think it would give it more legitimacy.”

Regulators would have to view that as a positive step, Cohen added. Under such a system, genuine transactions would have some sort of stamp of legitimacy while the illegal ones would not. Visa has it, MasterCard has it, so why not crypto?

Disparate dispute departments

“So, what’s the difference there?” Cohen asked. “There is no difference, just a different scheme. PayPal has its own scheme. Airbnb has its own scheme. Every company has its dispute department, so why shouldn’t there be dispute departments within the world of Bitcoin?”

The MyChargeBack system allows merchants who want to be part of the solution to benefit from a growing network of legitimate transactions, wallets, and consumers. For consumers, their payment history confirms trustworthiness.

Cohen said that cryptocurrency scammers take advantage of the naive through investment scams and other means. The victims often assume they are in a similar environment to traditional investments, but that is not the case. Many activities are obscured offshore or behind a network of wallets, and much of the activity is not regulated.

MyChargeBack brings that activity back into the regulated world by compiling evidence that can be used in court cases, Cohen said. They can track payment histories and identify suspect wallets, for example. If the law could catch up to the technology, the information would be even more effective.

A related problem in the cryptocurrency industry is that everyone is servicing usage, but nobody defines what proper use should be, Cohen said. State what is acceptable what is not and stand by it. That is a powerful draw.

Protection brings comfort

Early legislation helped address consumers’ issues with credit cards, and similar actions by industry and eventually governments will have the same effect here.

“People like PayPal because of the consumer protection, and consumers feel like they have a right to complain at PayPal,” Cohen said.

“I don’t see why Bitcoin should avoid that because everyone’s a consumer. Even the companies that could care less about consumers still give them these rights to get them in the door. They still give you your buyers protection.

“I think that’s just a normal human expression, that consumers should have a say, post-transaction.”

  • Tony Zerucha

    Tony is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.