U.S. Consumer Financial watchdog is considering extending e-banking laws to crypto

By: Henry Felix

U.S. Consumer Financial watchdog is considering extending e-banking laws to crypto

October 9, 2023 10:29 AM

The director of the United States Financial Consumer Watchdog has stated that the agency is planning to give guidelines on how cryptocurrency might fit into existing electronic fund transfer legislation.

The top U.S. consumer financial protection agency is considering enacting EFTA provisions to shield customers from fraudulent cryptocurrency transactions.

At a payments conference held on October 6 by the Brookings Institution think tank, CFPB Director Rohit Chopra said that the agency is considering expanding the scope of the EFTA to include "private digital dollars and other virtual currencies."

Chopra stated that the CFPB is considering issuing additional guidance to market participants in order to answer their questions about the applicability of the Electronic Fund Transfer Act with respect to private digital dollars and other virtual currencies in order to mitigate the harms associated with errors, hacks, and unauthorized transfers.

The Electronic Funds Transfer Act (EFTA) is a federal law that went into effect in 1978 and tries to prevent consumer losses due to improper electronic financial transfers made via debit cards, ATMs, and bank accounts.

Chopra stated that one of the CFPB's crypto-related goals is to clarify the applicability of existing rules governing electronic fund transfers to cryptocurrency. As seen on YouTube.

Financial institutions must advise customers of their potential liability for unlawful transactions per the rules. Users should get liability information before their accounts are used for the first time to make an electronic transfer.

The agency's action follows a 150% year-over-year surge in attacks of cryptocurrency platforms and the beginning of week two of the criminal trial of FTX co-founder Sam Bankman-Fried. Client monies were allegedly accessed and used fraudulently by Bankman-Fried.

A hack costing more than $400 million hit FTX in the weeks following its bankruptcy.

In addition, Chopra stated that the CFPB would be issuing orders to "certain large technology firms" to inquire into the use of customer data and the creation of virtual currencies.

The agency will also investigate the possibility of auditing non-banks that provide payment gateways.

Chopra further proposed that the Financial Stability Oversight Council of the Treasury recognize certain crypto operations as a "systemically important payment clearing or settlement activity," to which he added:

"To ensure that a stablecoin is, in fact, stable, this could provide, for example, other agencies with critical oversight and tools."