US considering application of Electronic Fund Transfer Act to crypto accounts US considering application of Electronic Fund Transfer Act to crypto accounts
The move aims to bolster consumer protections in a market plagued by recent significant hacks on platforms like Axie Infinity, Crypto.com, and FTX.
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Updated: Oct. 9, 2023 at 12:00 pm UTC
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The US Consumer Financial Protection Bureau (CFPB) is evaluating the application of the Electronic Fund Transfer Act (EFTA) to cryptocurrency platforms.
The move aims to bolster consumer protections in a market plagued by recent significant hacks on platforms like Axie Infinity, Crypto.com, and FTX.
EFTA regulations mandate that electronic fund facilitators inform users of their liabilities concerning unauthorized transfers.
Crypto Hacks, Financial Stability & Data Rights
During a conference organized by The Brookings Institution, CFPB Director Rohit Chopra brought to the fore the agency’s intentions of delving deeper into the operational dynamics of influential tech entities.
The spotlight is on their methodologies in handling user data and their strategic intentions surrounding the roll-out or backing of private digital currencies. This initiative stems from a growing realization of vulnerabilities in the crypto realm, with unauthorized transfers becoming more commonplace.
To tackle this, the CFPB is contemplating releasing more comprehensive guidelines, clarifying the boundaries and obligations under the EFTA for digital currencies and their handlers.
Chopra also shed light on the pressing need to imbue the crypto ecosystem with more financial stability.ย He cited a 2021 report, hinting at a potential role the Financial Stability Oversight Council might undertake.
The council could classify certain cryptocurrency-related activities as pivotal for payment and settlement processes, an action rooted in the Dodd-Frank Act’s provisions. Such a categorization would pave the way for more stringent oversight, especially ensuring instruments like stablecoins live up to their promise of stability.
On a parallel note, the CFPB is on the cusp of announcing a meticulously crafted rule around personal financial data rights. This strategic move aims to catalyze the transition to a transparent banking paradigm while underscoring the necessity for a fortified framework protecting user data.
Regulatory Evolution
A potentially transformative perspective emerged when SDNY Judge Denise Cote expressed her viewpoint that cryptocurrencies could be best understood under the “funds” umbrella.
Embracing this interpretation would signify a fundamental shift, enveloping cryptocurrency platforms within the protective ambit of the EFTA.
While this would undeniably bolster consumer-centric safeguards, it also sets the stage for more rigorous compliance demands on exchanges. As the CFPB hones its focus on the ever-evolving crypto landscape, industry participants and consumers alike are keenly awaiting more nuanced and definitive policy directions.
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Assad Jafri
AJ, a passionate journalist since Yemen's 2011 Arab Spring, has honed his skills worldwide for over a decade. Specializing in financial journalism, he now focuses on crypto reporting.
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FTX
FTX is a defunct cryptocurrency exchange, currently in bankruptcy proceedings, that was founded by Sam Bankman-Fried and Zixiao “Gary” Wang in May 2019.
Crypto.com
Crypto.com was founded in 2016 on a simple belief: itโs a basic human right for everyone to control their money, data and identity.