Cryptocurrencies could become target of the Consumer Financial Protection Bureau

Cryptocurrencies could become target of the Consumer Financial Protection Bureau

The financial consumer watchdog is prepared to take crypto under its purview

The head of the US Consumer Financial Protection Bureau (CFPB) says the agency is looking to administer guidance on how cryptocurrency could fall under laws regulating electronic fund transfers. The top agency for consumer financial protection is contemplating using the Electronic Fund Transfer Act (EFTA) as consumer protection against fraudulent crypto transactions.

At a recent payments conference by the Brookings Institution think tank on October 6, CFPB director Rohit Chopra said the watchdog agency is seeking to apply the EFTA to “private digital dollars and other virtual currencies.”

"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,"

The EFTA was passed in 1978 and protects consumers who transfer funds electronically, either using debit cards, ATMs, or bank accounts, with the aim of limiting consumer losses from unauthorized transactions.

Financial institutions must inform consumers if or when they are responsible for unauthorized transfers under the regulations. Disclosures of liability are required to be communicated before users make their first electronic transfer.

The action by the CFPB comes after crypto platform hacks increased over 150% year-by-year and as FTX co-founder Sam Bankman-Fried’s criminal trial begins its second week. He is accused of fraud after allegedly illegally accessing and using funds from customer accounts. FTX also lost about $400 million after suffering a hack just weeks after filing for bankruptcy.

Chopra also advised that the Treasury’s Financial Stability Oversight Council should categorize some crypto transactions as a “systemically important payment clearing or settlement activity,” saying, “This could provide, for example, other agencies with critical oversight and tools to ensure that a stablecoin is actually stable.”

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