The U.S. agency responsible for protecting consumers in financial matters is thinking about applying existing electronic banking laws to cryptocurrencies. The goal is to safeguard people from fraudulent activities involving digital currencies. The director of the Consumer Financial Protection Bureau (CFPB), Rohit Chopra, mentioned that they are considering extending the Electronic Fund Transfer Act (EFTA) to cover private digital currencies. This move aims to provide guidance to the market on how these laws would apply to prevent errors, hacks, and unauthorized transfers in the crypto space.
The EFTA, established in 1978, currently protects consumers during electronic fund transfers, such as those using debit cards, ATMs, or bank accounts. Its purpose is to minimize consumer losses arising from unauthorized transfers. Financial institutions are required to inform consumers about their liability for unauthorized transfers before the first electronic transfer occurs.
This decision by the CFPB comes at a time when there has been a significant increase in hacks on crypto platforms, exceeding 150% year-on-year. The move also coincides with the ongoing trial of Sam Bankman-Fried, co-founder of FTX, who is accused of fraudulent use of customer funds.
Chopra also mentioned that the CFPB plans to issue orders to large technology companies to gather information about their practices related to personal data and private currency issuance. Furthermore, the agency will investigate non-bank entities offering payment platforms.
Chopra proposed that the Treasury’s Financial Stability Oversight Council should categorize certain crypto activities as “systemically important payment clearing or settlement activities.” This suggests a broader regulatory approach to address the potential risks associated with cryptocurrency activities.