US consumer watchdog mulls applying e-banking laws to crypto

The leading United States company for consumer financial security is considering applying the Electronic Fund Transfer Act (EFTA) to crypto, in an attempt to protect consumers from deceptive crypto transfers. Speaking at an Oct. 6 payments conference by the Brookings Institution think tank, Consumer Financial Protection Bureau (CFPB) director Rohit Chopra said his agency is taking a look at using the EFTA to “personal digital dollars and other virtual currencies.”” To minimize the harms of errors, hacks, and unapproved transfers, the CFPB is checking out supplying extra guidance to market participants to address their concerns relating to the applicability of the Electronic Fund Transfer Act with regard to private digital dollars and other virtual currencies,” Chopra said.Passed in 1978, EFTA is a federal law that secures consumers when they transfer funds electronically, whether by debit cards, ATMs or bank accounts and intends to limit customer losses from unapproved transfers.Chopra said the CFPBs crypto-related strategies consist of supplying assistance on how existing electronic fund transfer laws use to crypto. Source: YouTubeThe policies obligate financial organizations to inform consumers of if– or when– they are responsible for unapproved transfers. Liability disclosures are indicated to be communicated prior to the first electronic transfer occurs on a user account.The move by the firm comes amidst an over 150% year-on-year increase in crypto-platform hacks and as the very first criminal trial of FTX co-founder Sam Bankman-Fried enters its second week who is implicated of fraudulently accessing and utilizing consumer funds.The exchange also suffered a hack north of $400 million in the weeks after its bankruptcy.Related: Basel Committee to consider disclosure requirements for banks crypto assetsChopra included the CFPB will likewise release orders to “specific large technology companies” to acquire details on their company practices in regard to using individual data and providing private currency.Additionally, the company will check out taking a look at non-banks that use payment platforms. Chopra also recommended the Treasurys Financial Stability Oversight Council must classify some crypto activities as a “systemically crucial payment clearing or settlement activity.”” This could supply, for example, other companies with crucial oversight and tools to guarantee that a stablecoin is actually steady.” Magazine: Blockchain detectives– Mt. Gox collapse saw birth of Chainalysis

Other Questions People Ask

What is the US consumer watchdog considering regarding e-banking laws and crypto?

The US consumer watchdog, the Consumer Financial Protection Bureau (CFPB), is contemplating the application of the Electronic Fund Transfer Act (EFTA) to cryptocurrencies. This move aims to enhance consumer protection against deceptive crypto transfers, particularly in light of the increasing number of hacks and fraudulent activities in the crypto space. CFPB director Rohit Chopra emphasized the need for guidance on how existing electronic fund transfer laws can be adapted to cover personal digital dollars and other virtual currencies.

How might the Electronic Fund Transfer Act impact crypto transactions?

If the CFPB applies the Electronic Fund Transfer Act to cryptocurrencies, it could significantly alter how crypto transactions are regulated. The EFTA is designed to protect consumers by limiting their liability for unauthorized transfers and ensuring they are informed about their rights before engaging in electronic transactions. This could lead to greater accountability for crypto platforms and enhanced security measures to protect users from errors and hacks.

What concerns prompted the CFPB to consider applying e-banking laws to crypto?

The CFPB's consideration of applying e-banking laws to crypto is largely driven by a dramatic increase in hacks targeting crypto platforms, with a reported rise of over 150% year-on-year. Additionally, the ongoing criminal trial of FTX co-founder Sam Bankman-Fried highlights the risks associated with unauthorized access and misuse of consumer funds in the crypto market. These developments underscore the urgent need for regulatory frameworks that can safeguard consumers in this rapidly evolving financial landscape.

What actions will the CFPB take regarding large technology companies and crypto?

The CFPB plans to issue orders to specific large technology companies to gather information about their practices related to personal data usage and private currency offerings. This initiative aims to ensure that these companies adhere to consumer protection standards similar to those required under existing e-banking laws. By investigating these practices, the CFPB seeks to enhance transparency and accountability in the crypto sector, ultimately benefiting consumers.

What role does the Financial Stability Oversight Council play in relation to crypto activities?

The Financial Stability Oversight Council (FSOC) may play a crucial role by classifying certain crypto activities as "systemically important payment clearing or settlement activities." This classification could provide additional oversight and regulatory tools to ensure that stablecoins maintain their intended stability. By doing so, the FSOC aims to enhance the overall security and reliability of the cryptocurrency market, thereby protecting consumers from potential risks associated with digital currencies. This directly relates to US consumer watchdog mulls applying e-banking laws to crypto in practical terms.