According to the Financial Times, the Consumer Financial Protection Bureau (CFPB) of the United States has proposed expanding the definition of the Electronic Fund Transfer Act to include any “asset with or used as currency,” including stablecoins and other similar alternative assets.
This measure would require cryptocurrency service providers to compensate customer account losses in the event of hacking or unauthorized transactions, aligning the standards of digital wallets with bank accounts. The draft proposal shows that the CFPB aims to enforce stronger security measures and reserves for digital asset companies to address operational risks.
If this proposal takes effect, it will have a significant impact on any US companies holding cryptocurrencies for customers, such as exchanges and custodial institutions. These companies will need to ensure sufficient reserve funds to provide compensation for customer accounts in the event of hacking or payment errors.
CFPB stated that the proposal mainly 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 at multiple merchants.
CFPB plans to solicit industry feedback on the proposal by March 31 and will subsequently decide whether to publish the final rules. If approved, these rules will compel cryptocurrency companies to enhance security standards and provide users with a higher level of protection, but may also increase the operational burden on these enterprises.
It is worth noting that this proposal comes at a time when the CFPB faces an uncertain future, as figures closely associated with former President Donald Trump, such as Elon Musk and Vivek Ramaswamy, have criticized the CFPB. Musk publicly called for the abolition of the CFPB, while Ramaswamy claimed in December last year that it was “one of the easiest institutions to shut down.”
