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The Director of the Consumer Financial Protection Bureau (CFPB), Rohit Chopra, has revealed that the agency is contemplating the extension of e-banking laws to encompass digital assets.
During the Bookings payment conference on October 6th, Chopra discussed the potential application of the Electronic Fund Transfer Act (EFTA) to safeguard investors and users in the cryptocurrency space.
In pursuit of creating a secure environment for users, the CFPB is exploring the adaptation of conventional financial regulations to virtual assets.
Chopra stated, “To mitigate the risks of errors, cyberattacks, and unauthorized transfers, the CFPB is actively considering offering further guidance to industry participants regarding the relevance of the Electronic Fund Transfer Act to private digital currencies and other virtual forms of money.”
This initiative comes as a response to the recent surge in malicious activities within the digital asset market.
Should the EFTA be extended to cover cryptocurrencies, virtual asset firms will be compelled to introduce specific operational changes related to disclosures and other pertinent issues.
Under the EFTA, banks and affiliated financial institutions are obligated to disclose the extent of their liability before each electronic transaction. This requirement aims to reduce the substantial losses that users have experienced due to unauthorized crypto transactions in recent years.
Chopra emphasized the agency’s intention to scrutinize the role of non-bank entities in the crypto market, as some of them provide payment platforms that should adhere to safety and security standards.
He suggested that the Treasury’s Financial Stability Oversight Council should identify certain crypto activities as systemically significant, enabling relevant parties and agencies to ensure the stability of stablecoins.
As part of the effort to collaborate with companies in detecting potential fraud, digital asset firms and issuers will be required to furnish specific information about their use of consumer data before introducing private cryptocurrencies.
The Electronic Fund Transfer Act, traditionally applied in conventional finance, offers protection to consumers against losses when conducting online transfers through debit cards, automated teller machines, mobile phones, and other electronic means.
The regulatory landscape in the digital asset market has witnessed significant developments in various jurisdictions, all aimed at enhancing user protection. For instance, the UK’s Financial Conduct Authority recently introduced stringent regulations governing crypto advertising, mandating firms to ensure that customers possess sufficient knowledge and explicitly highlighting the risks associated with advertisements.
In Canada, the Association of Securities Regulators has introduced a template for stablecoin issuers and has called for increased regulation in the market.
Meanwhile, the United States market is grappling with regulatory uncertainty, with numerous legal disputes between authorities and industry leaders, setting the stage for potential regulatory changes in the future.
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