The head of the leading U.S. consumer financial protection agency is exploring the possibility of applying the Electronic Fund Transfer Act (EFTA) to safeguard consumers against fraudulent cryptocurrency transactions.
At a payments conference hosted by the Brookings Institution think tank on October 6, Rohit Chopra, the director of the Consumer Financial Protection Bureau (CFPB), revealed the agency’s interest in extending the EFTA’s protections to encompass “private digital dollars and other virtual currencies.”
The EFTA, enacted in 1978, is a federal law designed to protect consumers involved in electronic fund transfers, including those conducted through debit cards, ATMs, and bank accounts. Its primary aim is to minimize consumer losses resulting from unauthorized transfers. Under the EFTA, financial institutions are required to inform consumers about their liability for unauthorized transfers, with liability disclosures made prior to the first electronic transfer on a user’s account.
The move by the CFPB comes amid a significant increase in crypto-platform hacks, with a year-on-year surge of over 150%. This development coincides with the ongoing criminal trial of Sam Bankman-Fried, the co-founder of FTX, who faces allegations of fraudulent use of customer funds. FTX itself suffered a massive hack exceeding $400 million shortly after its bankruptcy.
Chopra also disclosed that the CFPB would issue orders to gather information from “certain large technology firms” regarding their business practices related to personal data use and private currency issuance. Additionally, the agency intends to examine non-bank entities that offer payment platforms.
Furthermore, Chopra proposed that the Treasury’s Financial Stability Oversight Council should classify specific crypto activities as “systemically important payment clearing or settlement activities.” Such a designation could grant other agencies enhanced oversight and tools to ensure the stability of stablecoins.