The Consumer Financial Protection Bureau (CFPB), the United States' leading agency for consumer financial protection, is exploring the application of the Electronic Fund Transfer Act (EFTA) to the realm of cryptocurrencies.

This move aims to protect consumers from fraudulent transactions within the crypto space.

Speaking at a payments conference organized by the Brookings Institution think tank on 6 October, CFPB director Rohit Chopra revealed that his agency is actively considering extending the provisions of the EFTA to encompass "private digital dollars and other virtual currencies."

The goal is to mitigate the risks associated with errors, hacks, and unauthorised transfers in the crypto sector.

EFTA

The EFTA, enacted in 1978, is a federal law designed to safeguard consumers when they engage in electronic fund transfers, including debit card transactions, ATM withdrawals, and bank account transfers.

Its primary objective is to limit potential financial losses incurred by consumers due to unauthorised transfers.

Under the EFTA, financial institutions are obliged to communicate to consumers the circumstances under which they may be held liable for unauthorised transfers.

These liability disclosures must be made before the first electronic transfer takes place on a user's account.

Rising Hacks

The CFPB's move to consider crypto regulation comes amid a notable surge in crypto-platform hacks, with a staggering year-on-year increase of over 150%.

Additionally, the agency's decision coincides with the ongoing criminal trial of Sam Bankman-Fried, co-founder of FTX, who faces allegations of fraudulent use of customer funds.

The exchange itself suffered a significant hack, amounting to over $400 million, shortly after declaring bankruptcy.

In addition to exploring crypto regulation, Chopra announced that the CFPB will issue orders to "certain large technology firms" to gather information on their business practices concerning the use of personal data and the issuance of private currencies.

The agency also intends to scrutinise non-bank entities that offer payment platforms.

Furthermore, Chopra suggested that the Treasury's Financial Stability Oversight Council should classify certain crypto activities as "systemically important payment clearing or settlement activities."

Such a classification could grant other agencies critical oversight and tools to ensure the stability of stablecoins and the overall crypto ecosystem.