As the digital assets market continues to evolve, regulators are also keeping pace. In a new development, the Consumer Financial Protection Bureau (CFPB), a top-tier consumer finance watchdog in the United States, is considering extending the applicability of the Electronic Fund Transfer Act (EFTA) to cryptocurrencies.
This news comes from a recent payments conference where the Director of CFPB, Rohit Chopra, disclosed the possibility of applying EFTA on private digital dollars and other virtual currencies. Passed in 1978, EFTA is a federal law aiming to protect consumers in cases of electronic fund transfers. The core objective here appears to be minimizing damages from unauthorized transfers, errors, or hacks targeting digital assets.
This movement by the agency occurs within the backdrop of an exponential growth of approximately 150% year-on-year in instances of crypto-platform hacks. The first criminal trial of FTX co-founder Sam Bankman-Fried, tied to unauthorized access and use of customer funds, also feeds into the urgency that fuels this regulatory impulse.
However, the plan has broader implications beyond just EFTA. The financial institutions need to disclose to the consumers about their potential liabilities for unauthorized transfers before initiating the first electronic transfer on a user account. The effect of this may be an enhanced responsibility for financial institutions towards consumers, bringing a sense of balance to the cryptosphere.
The CFPB has also disclosed that it is planning to issue orders to certain large technology firms, to learn more about the use of personal data and their practices around issuing private currency. The agency desires to extend its examination towards non-banks offering payment platforms.
Chopra has also suggested, without obviously mincing words, that the Treasury’s Financial Stability Oversight Council might categorize certain cryptocurrency activities as a ‘systemically crucial payment clearing or settlement activity.’ This stands to potentially give other agencies a critical oversight and tools to ensure that a stablecoin genuinely remains stable.
It’s clear from this information that the crypto regulation sphere is an inherently turbulent, fluid domain. As it attempts to counterbalance consumer safety with innovation, it risks either inhibiting progress or enabling chaos, depending on the level of control exerted.
Source: Cointelegraph
