April 19, 2024
US Consumer Watchdog Contemplates Extending E-Banking Laws to Crypto
Latest Cryptocurrency News

US Consumer Watchdog Contemplates Extending E-Banking Laws to Crypto

The Consumer Financial Protection Bureau (CFPB), the leading agency for consumer financial protection in the United States, is considering utilizing the Electronic Fund Transfer Act (EFTA) as a means to safeguard consumers against fraudulent cryptocurrency transfers.

CFPB director Rohit Chopra announced this initiative at a payments conference hosted by the Brookings Institution think tank on October 6. According to Chopra, the agency is exploring the application of the EFTA to “private digital dollars and other virtual currencies” to mitigate the risks of errors, hacks, and unauthorized transfers in the cryptocurrency space.

The Electronic Fund Transfer Act (EFTA) is a federal law established in 1978 to protect consumers during electronic fund transfers, including those made through debit cards, ATMs, or bank accounts. Its primary aim is to limit consumer losses resulting from unauthorized transfers. Financial institutions are obligated to inform consumers about their liability for unauthorized transfers, typically before the first electronic transfer occurs in a user’s account.

This decision by the CFPB comes amid a significant increase in crypto-platform hacks, with a year-on-year rise of over 150%. It also coincides with the ongoing criminal trial of FTX co-founder Sam Bankman-Fried, who faces allegations of fraudulently accessing and using customer funds. FTX itself experienced a hack involving over $400 million in assets shortly after the bankruptcy of the company.

Chopra further revealed that the CFPB would issue orders to “certain large technology firms” to gather information about their business practices related to the use of personal data and the issuance of private currencies. Additionally, the agency intends to investigate non-bank entities offering payment platforms.

Chopra also suggested that the Treasury’s Financial Stability Oversight Council should consider classifying some cryptocurrency activities as “systemically important payment clearing or settlement activities.” This designation would provide other regulatory agencies with critical oversight and tools to ensure the stability of stablecoins and related activities.

Image by vwalakte on Freepik

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