The US’s top consumer financial protection agency is considering applying the Electronic Funds Transfer Act (EFTA) to cryptocurrencies, in an effort to protect consumers from fraudulent cryptocurrency transfers.
Speaking on October 6 Payments conference According to the Brookings Institution think tank, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra said his agency is looking to apply the European Free Trade Agreement to “private digital dollars and other virtual currencies.”
“To limit the harms of errors, hacks, and unauthorized transfers, the CFPB is exploring providing additional guidance to market participants to answer their questions regarding the applicability of the Electronic Funds Transfer Act with respect to private digital dollars and other virtual currencies,” Chopra said.
Passed in 1978, the European Free Trade Association (EFTA) is a federal law that protects consumers when they transfer money electronically, whether via debit cards, ATMs, or bank accounts, and aims to limit consumer losses caused by unauthorized transfers.
Regulations require financial institutions to inform consumers if – or when – they are liable for unauthorized transfers. This liability disclosure is supposed to be communicated before the first electronic transfer is made on the user’s account.
The agency’s move comes amid a more than 150% year-over-year increase in hacks of cryptocurrency platforms and as the first criminal trial of FTX co-founder Sam Bankman Fried enters its second week, accused of fraudulently accessing and using customers’ funds.
The exchange also suffered a $400 million hack in the weeks following its bankruptcy.
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Chopra added that the CFPB will also issue orders to “certain major technology companies” to obtain information about their business practices regarding the use of personal data and the issuance of private currency.
In addition, the agency will consider examining non-bank institutions that offer payment platforms.
Chopra also suggested that the Treasury Department’s Financial Stability Oversight Board classify certain cryptocurrency activities as “systemically important payment or settlement clearing activity.”
“This could, for example, provide other agencies with critical tools and oversight to ensure the stability of a truly stablecoin.”
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