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The US Consumer Financial Protection Bureau (CFPB) has unveiled a proposal that could redefine consumer protections in the cryptocurrency sector. The rule aims to hold crypto service providers accountable for compensating users who lose funds to theft or fraud. US Regulator Unveils Plan to Expand Consumer Protections in Crypto On January 10, the CFPB announced the proposed rule, which aims to expand the scope of the Electronic Fund Transfer Act (EFTA) to include crypto accounts using “emerging payment mechanisms.” This essentially aligns crypto accounts with traditional bank accounts, subjecting them to the same error and fraud prevention standards. The bureau also proposes redefining the term “funds” to include assets beyond the US dollar. This broader interpretation covers assets functioning as a medium of exchange or a measure of value, such as cryptocurrencies. Additionally, wallet providers would be required to disclose critical consumer rights, including liability for unauthorized transactions, transaction limits, applicable fees, and error resolution processes. Regular statements and notifications about changes to terms would also be mandatory. If implemented, the rule could provide more robust protections for consumers transacting in stablecoins and other digital assets. Public comments on the proposal are open until March 31, after which the CFPB will determine its next steps. Crypto Experts Highlight Concerns Despite its potential to address rising cyber threats — crypto hacks alone accounted for around $3 billion in losses in 2024 — the rule has drawn criticism. Critics argue that the CFPB rule’s broad definitions and lack of consultation with key crypto stakeholders may hinder its implementation. Jai Massari, Chief Legal Officer at Lightspark, emphasized that the rule leaves many questions unanswered. She pointed out that the language does not appear to cover non-custodial wallets, creating uncertainty for developers and users alike. “There are many many questions raised by the proposal…

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Filed under: News - @ January 11, 2025 10:04 pm