US Considers Applying Electronic Fund Transfer Act to Crypto Accounts for Enhanced Consumer Protection

US Considers Applying Electronic Fund Transfer Act to Crypto Accounts for Enhanced Consumer Protection

The US Consumer Financial Protection Bureau (CFPB) is currently in the process of evaluating the potential application of the Electronic Fund Transfer Act (EFTA) to cryptocurrency platforms. This move is aimed at strengthening consumer protections within the cryptocurrency market, which has recently been plagued by significant hacks on platforms such as Axie Infinity,, and FTX.

EFTA regulations mandate that electronic fund facilitators must inform users about their liabilities concerning unauthorized transfers. By considering the application of EFTA to cryptocurrency platforms, the CFPB aims to address the growing concerns related to unauthorized transfers in the crypto space and provide consumers with clearer guidelines and protections.

During a conference organized by The Brookings Institution, CFPB Director Rohit Chopra highlighted the agency's intention to delve deeper into the operational practices of influential tech entities, especially regarding their handling of user data and their involvement in private digital currencies. This initiative comes in response to the increasing vulnerabilities in the cryptocurrency ecosystem and the rising frequency of unauthorized transfers.

To address these issues, the CFPB is contemplating the release of more comprehensive guidelines that clarify the boundaries and obligations under the EFTA for digital currencies and their service providers.

Chopra also emphasized the urgent need to bring more financial stability to the crypto ecosystem. He referred to a 2021 report and suggested that the Financial Stability Oversight Council might play a role in classifying certain cryptocurrency-related activities as pivotal for payment and settlement processes. Such a classification could lead to stricter oversight, particularly for stablecoins, to ensure they fulfill their promise of stability.

In parallel, the CFPB is poised to announce a well-crafted rule concerning personal financial data rights. This strategic move aims to accelerate the transition toward a transparent banking paradigm while establishing a robust framework for protecting user data.

A potentially transformative perspective has emerged from SDNY Judge Denise Cote, who suggested that cryptocurrencies could be best understood within the "funds" category. Adopting this interpretation would signify a fundamental shift, bringing cryptocurrency platforms under the protective umbrella of the EFTA.

While such a move would undoubtedly enhance consumer-centric safeguards, it also sets the stage for stricter compliance requirements on cryptocurrency exchanges. As the CFPB focuses its attention on the ever-evolving crypto landscape, both industry participants and consumers eagerly await more nuanced and definitive policy directions to shape the future of crypto regulation in the United States.

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