**US Regulator Proposes Rule to Expand Consumer Protections in Crypto**

Enhanced Protections for Crypto Users

The US Consumer Financial Protection Bureau (CFPB) has unveiled a proposal aimed at redefining consumer protections in the cryptocurrency sector. The proposed rule seeks to hold crypto service providers accountable for compensating users who lose funds to theft or fraud, providing more robust protections for consumers transacting in stablecoins and other digital assets.

Aligning Crypto Accounts with Traditional Bank Accounts

The CFPB’s proposal, announced on January 10, aims to expand the scope of the Electronic Fund Transfer Act (EFTA) to include crypto accounts using “emerging payment mechanisms.” This move 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, covering assets functioning as a medium of exchange or a measure of value, such as cryptocurrencies.

Disclosure Requirements for Wallet Providers

Under the proposed rule, 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, ensuring that consumers are well-informed about their rights and responsibilities.

Public Comments and Next Steps

Public comments on the proposal are open until March 31, after which the CFPB will determine its next steps. If implemented, the rule could provide more robust protections for consumers in the cryptocurrency sector.

Crypto Experts Raise Concerns

Despite the potential benefits of the proposed rule, crypto experts have raised concerns about its broad definitions and lack of consultation with key crypto stakeholders. Critics argue that the rule may hinder its implementation and create uncertainty for developers and users alike.

Jai Massari, Chief Legal Officer at Lightspark, pointed out that the language does not appear to cover non-custodial wallets, leaving many questions unanswered. Legal expert Drew Hinkes echoed these concerns, noting that applying the EFTA framework to cryptocurrency transactions could lead to complications. Bill Hughes of Consensys took a more critical stance, calling the CFPB’s proposal a form of overreach.

Conclusion

The CFPB’s proposed rule aims to expand consumer protections in the cryptocurrency sector, but its implementation is not without challenges. While the rule has the potential to address rising cyber threats and provide more robust protections for consumers, its broad definitions and lack of consultation with key crypto stakeholders have raised concerns among experts. As the public comment period comes to a close, it remains to be seen how the CFPB will address these concerns and move forward with the proposed rule.

Source: Beincrypto.com

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