US Consumer Watchdog Mulls Applying e-banking Laws to Crypto – The Consumer Financial Protection Bureau (CFPB), the leading U.S. agency safeguarding consumer financial interests, is exploring the utilization of the Electronic Fund Transfer Act (EFTA) to safeguard consumers from fraudulent cryptocurrency transfers. Rohit Chopra, the director of the CFPB, announced during a payments conference held by the Brookings Institution think tank on October 6th that his agency is considering providing guidance on how cryptocurrencies could fall under the purview of electronic fund transfer regulations.
Specifically, they are examining the applicability of EFTA to private digital currencies and other virtual assets. “To reduce the harms of errors, hacks and unauthorized transfers, the CFPB is exploring providing additional guidance to market participants to answer their questions regarding the applicability of the Electronic Fund Transfer Act with respect to private digital dollars and other virtual currencies,” Chopra said.
Enacted in 1978, the Electronic Fund Transfer Act (EFTA) is a federal law designed to safeguard consumers during electronic fund transfers, such as those made through debit cards, ATMs, or bank accounts. Its primary objective is to minimize consumer losses resulting from unauthorized transfers. These regulations compel financial institutions to notify consumers about their liability for unauthorized transfers, with the intention of providing this information before the first electronic transfer occurs on a user’s account.
This action by the agency coincides with a significant year-on-year increase of over 150% in crypto-platform hacks and the ongoing criminal trial of FTX co-founder Sam Bankman-Fried. Bankman-Fried stands accused of fraudulent access and use of customer funds. FTX itself also experienced a hack amounting to over $400 million shortly after declaring bankruptcy. Chopra added the CFPB will also issue orders to “certain large technology firms” to gain information on their business practices regarding using personal data and issuing private currency.
Additionally, the agency will look into examining non-banks that offer payment platforms. Chopra also suggested the Treasury’s Financial Stability Oversight Council should classify some crypto activities as a “systemically important payment clearing or settlement activity,” adding: “This could provide, for example, other agencies with critical oversight and tools to ensure that a stablecoin is actually stable.”