Is the proposal to expand the Electronic Fund Transfer Act to cryptocurrency by the Consumer Financial Protection Bureau in the United States good or bad news?

Is the proposal to expand the Electronic Fund Transfer Act to cryptocurrency by the Consumer Financial Protection Bureau in the United States good or bad news?

Is the proposal to expand the Electronic Fund Transfer Act to cryptocurrency by the Consumer Financial Protection Bureau in the United States good or bad news?

According to a report from the Financial Times, the U.S. Consumer Financial Protection Bureau (CFPB) has proposed expanding the definition of the Electronic Fund Transfer Act to include any “asset that serves as or is used as a medium of exchange.” This would include stablecoins and other similar alternative assets.

This move would require cryptocurrency service providers to be responsible for compensating customer account losses in the event of a hack or unauthorized transaction, in order to align the standards of digital wallets with bank accounts. The proposed draft shows that the CFPB aims to enforce this regulation to enhance the security and reserves of digital asset companies in response to operational risks.

If implemented, this proposal would have a significant impact on any U.S. companies holding cryptocurrencies for customers, such as exchanges and custodial institutions. These companies would need to ensure they have sufficient reserve funds to compensate customer accounts in case of hacks or payment errors.

The CFPB stated that the proposal primarily targets “virtual currency wallets used for purchasing goods and services or conducting peer-to-peer transfers,” virtual items in online gaming accounts, and credit card reward point accounts that can be used for shopping with multiple merchants.

The CFPB plans to solicit industry feedback on the proposal by March 31 and will then decide whether to issue the final rule. If approved, the rule would force cryptocurrency companies to enhance their security standards and provide users with a higher level of protection, but it could also increase the operational burden on these companies.

It is worth noting that this proposal comes at a time when the CFPB is facing an uncertain future, as both Elon Musk and Vivek Ramaswamy, who have close ties to former U.S. President Donald Trump, have criticized the CFPB. Musk has publicly called for the abolition of the CFPB, while Ramaswamy claimed in December last year that it is “one of the easiest agencies to shut down.”