The Consumer Financial Protection Bureau (CFPB), the primary US agency for consumer financial protection, is exploring the use of the Electronic Fund Transfer Act (EFTA) to safeguard consumers against fraudulent cryptocurrency transfers.
Consumer Protection with E-Banking Laws
CFPB Director Rohit Chopra revealed at a Brookings Institution payments conference that the agency is considering the applicability of the EFTA to “private digital dollars and other virtual currencies.” The move aims to address issues such as errors, hacks, and unauthorized crypto transfers that pose risks to consumers.
Chopra said the CFPB’s crypto-related plans include providing guidance on how existing electronic fund transfer laws apply to crypto. Source: YouTube
Electronic Fund Transfer Act Overview
The EFTA, enacted in 1978, is a federal law designed to protect consumers during electronic fund transfers, including those made via debit cards, ATMs, or bank accounts. It mandates financial institutions to inform consumers about their liability for unauthorized transfers before the first electronic transfer takes place.
This development coincides with a significant year-on-year increase of over 150% in crypto-platform hacks. Additionally, the ongoing criminal trial of FTX co-founder Sam Bankman-Fried, accused of fraudulent access and use of customer funds, has underscored concerns about security and consumer protection in the crypto industry.
Further Actions by CFPB
The CFPB is planning to issue orders to “certain large technology firms” to gather information about their business practices related to personal data usage and the issuance of private currency. The agency also intends to scrutinize non-bank entities offering payment platforms.
Systemic Oversight of Stablecoins
Chopra suggested that the Treasury’s Financial Stability Oversight Council consider classifying specific crypto activities as “systemically important payment clearing or settlement activities.” This move would grant other agencies essential oversight and tools to ensure the stability of stablecoins.
The CFPB’s exploration of applying e-banking laws to the crypto sector underscores the growing regulatory interest in addressing consumer protection and security concerns within the cryptocurrency space.