The head of the Consumer Financial Protection Bureau (CFPB) has revealed the agency’s deliberations on adapting e-banking regulations for digital assets.
Addressing attendees at the Bookings payment conference on October 6, Rohit Chopra shared the possibility of invoking the Electronic Fund Transfer Act (EFTA) to safeguard stakeholders within the cryptocurrency environment.
Chopra emphasized the CFPB’s intention to utilize established financial protocols to ensure a secure framework for users engaging with virtual assets.
“In light of the increasing incidents of errors, security breaches, and unauthorized transfers, the CFPB is considering offering more clarity to market players about the relevance of the Electronic Fund Transfer Act to private digital currencies and other virtual assets,” stated the bureau.
This consideration emerges amidst the backdrop of a noticeable uptick in malicious activities within the cryptocurrency sector.
Should the EFTA be extended to cover the cryptocurrency realm, digital asset enterprises would be mandated to implement specific modifications, particularly concerning disclosures and related matters.
EFTA to limit user losses
Before proceeding with any electronic transaction, banks and related financial entities are obligated to communicate the degree of associated risks to their clients.
Such a move aims to curtail the substantial financial setbacks users have encountered due to unauthorized cryptocurrency activities in the past.
Addressing the topic, “Making America’s payment system apt for a digital era,” he further mentioned that the agency would scrutinize the involvement of non-traditional banking institutions in the cryptocurrency sphere, especially those presenting payment platforms that should prioritize user safety and security.
He advocated for the Treasury’s Financial Stability Oversight Council to designate certain cryptocurrency activities as crucial from a systemic perspective. This would equip stakeholders and regulatory bodies with the mechanisms to validate that “a stablecoin maintains its stability.”
To further the objective of collaborating with companies to pinpoint potential deceit, digital asset enterprises and coin issuers would be expected to disclose specific details regarding their utilization of consumer data and information before launching private cryptocurrencies.
Historically applied in conventional finance, the EFTA serves as a protective shield for consumers, safeguarding them from potential losses during electronic transactions, whether via debit cards, ATMs, mobile devices, or other platforms.
Regulation ramps up
Throughout this year, the evolving regulatory landscape for digital assets has been a persistent theme worldwide, with a primary focus on enhancing user protection.
For instance, the UK’s Financial Conduct Authority recently unveiled a fresh set of regulations targeting cryptocurrency advertising. These rules obligate firms to ensure their clientele are well-informed and clearly indicate the associated risks in their advertisements, among other stipulations.
This regulatory tightening has led some cryptocurrency exchanges and issuers to contemplate exiting the UK market. However, industry giants like Binance and OKX have adapted, modifying their operational policies to comply with the new directives.
Over in Canada, the Association of Securities Regulators has launched a framework for stablecoin issuers and subsequently published guidelines emphasizing the need for increased regulatory oversight in the digital asset space.
While countries like the UK, Europe, and Canada are progressively defining their regulatory stances, the United States remains in a state of flux. The American market grapples with ongoing regulatory uncertainties, evidenced by numerous legal battles between governmental agencies and key figures in the cryptocurrency industry.