Last month, in September 2023, the cryptocurrency industry set a new record for crypto exploits this year, with staggering losses totaling $329.8 million worth of crypto. In response to these ongoing exploitations and to protect consumers, a United States agency is planning to introduce a new act.
EFTA’s role in strengthening Cryptocurrency consumer protection
During the payment conference held by the Brookings Institute think tank on October 6, 2023, Rohit Chopra, the director of the Consumer Financial Protection Bureau (CFPB), revealed the agency’s plan to utilize the Electronic Fund Transfer Act (EFTA) to safeguard investors in the cryptocurrency industry.
This announcement comes as the crypto industry faces numerous cybersecurity breaches amidst the ongoing trials of FTX co-founder Sam Bankman-Fried.
The EFTA, which was passed in 1978, was designed by federal law to provide consumer protection during fund transfers, including transactions made through debit or credit cards, ATMs, or bank accounts. Its primary goal is to minimize consumer losses resulting from unauthorized transfers.
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Under the EFTA, financial institutions are required to inform customers about their liability for unauthorized transfers before the first electronic transfer occurs in their accounts. Chopra expressed the CFPB’s intention to offer further guidance to these high-risk market participants regarding the applicability of the EFTA to cryptocurrencies.
The CFPB’s decision to explore these regulations stems from the significant increase of over 150% in crypto-platform hacks in the past year. Earlier in the UK, the National Crime Agency expanded its investigation team to counter increasing Crypto crime, as reported by Todayq News.
Calling for systemic oversight in the Crypto market
Chopra also disclosed that the CFPB plans to issue orders to “certain large technology firms” to collect information about their business practices related to the use of personal data and the issuance of private currencies. Additionally, the agency is focusing on scrutinizing non-bank entities offering payment platforms.
Furthermore, Chopra suggested that the Treasury’s Financial Stability Oversight Council should classify specific crypto activities as “systemically important payment clearing or settlement activities.” This designation would provide other regulatory bodies with the necessary tools and oversight to ensure the stability of stablecoins and the broader crypto market.