The Consumer Financial Protection Bureau (CFPB), the top U.S. agency for consumer financial protection, is exploring the possibility of applying electronic banking regulations to cryptocurrencies.
Speaking at a recent conference, CFPB director Rohit Chopra said the agency is looking at extending the Electronic Fund Transfer Act (EFTA) to “private digital dollars and other virtual currencies” in an effort to protect consumers.
The EFTA passed in 1978, is a federal law that safeguards consumers when transferring funds electronically through debit cards, ATMs, bank accounts, and more. It aims to limit consumer liability for unauthorized transfers by requiring financial institutions to disclose when users are responsible for unauthorized transactions.
According to Chopra, applying EFTA to cryptocurrencies could help reduce harm from errors, hacks, and unauthorized crypto transfers. This exploratory move comes as crypto hacks have surged over 150% year-over-year in 2022.
Most recently, the FTX exchange suffered a breach of over $400 million shortly after declaring bankruptcy amid fraud allegations against founder Sam Bankman-Fried. The high-profile case has prompted increasing calls for better crypto consumer protections.
In addition to exploring an EFTA expansion, Chopra said the CFPB plans to issue orders to “certain large technology firms” to obtain data on their practices around personal data use and digital currencies. The agency will also examine non-banks offering payment platforms.
Furthermore, Chopra suggested the Treasury’s Financial Stability Oversight Council categorize some crypto activities as systemically important payment systems. This could allow enhanced oversight tools to ensure stablecoins are fully backed.
As crypto adoption accelerates, regulators are determining how to best protect consumers in the nascent space. The CFPB’s focus on applying e-banking guardrails to digital assets signals a ramping up of oversight amid deepening concerns over crypto risks.
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