New CFPB Rule Could Expand Consumer Protections to Crypto
The U.S. Consumer Financial Protection Bureau (CFPB) has unveiled a proposal that could redefine consumer protections in the cryptocurrency space.
The rule aims to hold cryptocurrency service providers responsible for compensating users who lose funds due to theft or fraud.
U.S. regulators unveil plans to expand cryptocurrency consumer protections
On January 10, the CFPB announced its proposed ruleaims to expand the scope of the Electronic Funds Transfer Act (EFTA) to include crypto accounts using “emerging payment mechanisms.” This is essentially aligned Crypto Account They must adhere to the same error and fraud prevention standards as traditional bank accounts.
The Bureau also proposed redefining the term “fund” to include assets other than U.S. dollars. This broader interpretation covers assets that serve as a medium of exchange or measure of value, such as cryptocurrencies.
In addition, wallet providers are required to disclose key consumer rights, including liability for unauthorized transactions, transaction limits, applicable fees and error resolution processes. Periodic statements and notifications about changes to the Terms are also mandatory.
If implemented, the rule could provide stronger protection for: Consumers use stablecoins for transactions and other digital assets. The deadline for public comment on the proposal is March 31, after which the CFPB will determine next steps.
Cryptocurrency experts highlight concerns
Despite its potential to address growing cyber threats, cryptocurrency hackers alone account for Loss of approximately US$3 billion in 2024 –The rule has drawn criticism. critics think CFPB Rules A broad definition and lack of consultation with key cryptocurrency stakeholders could hinder its implementation.
Lightspark Chief Legal Officer Jai Massari emphasized that the rule leaves many unanswered questions. She noted that the language does not appear to cover non-custodial wallets, creating uncertainty for developers and users.
“The proposal and RFI raise a lot of questions, but a simple reading of the proposed guidance does not lead to the conclusion that non-custodial wallets (or their software developers) will be subject to Reg E,” Massai wrote.
Legal Expert Drew Hinks echo These concerns and point to the application of the European Free Trade Association framework to cryptocurrency trading Complications may result. He questioned the practicality of some requirements, such as interim credits, and called for greater clarity by narrowing the focus on specific parties and asset types.
Meanwhile, Bill Hughes of Consensys took a more critical stance, calling the CFPB’s proposal an overreach. He warned that this regulatory trend could continue unchecked unless future U.S. leadership can address the issue.
“They are choosing cryptocurrencies under the banner of consumer protection (who can argue with protecting consumers, after all?) and they won’t stop until someone stops them. That person is the next President of the United States. So, adding this to the list of things that need to be addressed “Statutory Law” question list,” he point out.
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