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 “assets that have or are used as currency,” including stablecoins and other similar alternative assets.
This measure would require cryptocurrency service providers to compensate customer account losses resulting from hacking attacks or unauthorized transactions, aligning the standards for digital wallets with those of bank accounts. The proposed draft shows that the CFPB aims to enforce stronger security measures and reserves for digital asset companies to address operational risks.
If implemented, this proposal would have a significant impact on any US company holding cryptocurrencies for customers, such as exchanges and custodial institutions. These companies would need to ensure they have sufficient reserve funds to provide compensation for customer accounts in the event of hacking attacks or payment errors.
The CFPB states 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 at multiple merchants.
The CFPB plans to solicit industry opinions on the proposal before March 31st and will subsequently decide whether to publish the final rules. If approved, these rules would 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 is facing an uncertain future, as both Elon Musk and Vivek Ramaswamy, who have close ties to former US 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 the agency is “one of the easiest institutions to shut down.”