The Consumer Financial Protection Bureau (CFPB) has put forth a new interpretive rule on Jan. 10 that could have significant implications for the crypto industry. The proposed rule aims to extend the protections of the Electronic Fund Transfer Act (EFTA) to crypto wallets, potentially holding them accountable in case of hacks or unauthorized transactions.
Under the proposed rule, users would have the right to dispute unauthorized transfers and limit liability for errors, similar to the protections they enjoy with traditional banking and electronic fund transfers. This would mean that wallet providers could be held responsible for losses resulting from fraud, hacking, or unauthorized transactions.
However, not everyone is on board with this proposal. Bill Hughes, a lawyer at Consensys, expressed skepticism about the rule, arguing that it could be seen as an overreach disguised as consumer protection. He raised concerns about the potential burden on wallet providers, who would be required to provide disclosures, periodic statements, and terms and conditions similar to traditional financial institutions.
Hughes also pointed out that under this framework, wallet providers could be held responsible for unauthorized transfers even in cases of user negligence. This could unfairly disadvantage emerging payment mechanisms and consolidate regulatory control under the guise of consumer protection.
The CFPB is currently accepting public comments on the rule until Mar. 31, 2025, indicating that they are open to feedback from all stakeholders, including wallet providers, crypto advocates, and consumers. While the bureau uses these comments to inform its decision-making process, there is no guarantee that the proposed rule will be amended or implemented.
Overall, the proposed rule has sparked a debate within the crypto community about the balance between consumer protection and regulatory overreach. It remains to be seen how this rule will ultimately impact the crypto industry and whether any changes will be made based on the feedback received during the comment period.