The Consumer Financial Protection Bureau (CFPB) proposed a new interpretive rule on Jan. 10 that could extend the Electronic Fund Transfer Act (EFTA) protections to crypto wallets, potentially holding them accountable in case of hacks.

The proposed rule, currently open for commentary, clarifies how existing EFTA regulations apply to new payment systems, including stablecoins and other digital payment mechanisms. It aims to provide consumers the same protections they enjoy with traditional banking and electronic fund transfers.

As a result, users would have the right to dispute unauthorized transfers and limit liability for errors. Wallet providers would then be responsible for losses resulting from fraud, hacking, or unauthorized transactions.

Bad for wallet providers

Bill Hughes, a lawyer at Consensys, expressed skepticism about the rule, describing it as an overreach disguised as consumer protection. He emphasized that under the proposed regime, wallet providers would be responsible for unauthorized transfers, even in cases of user negligence.

He said:

“Hacked because you tweeted your seed phrase or believed that a fashion model in Malaysia needed $5,000 to fly to see you? Don’t worry, your wallet might have to cover it.” 

Hughes also highlighted the operational burden for wallet providers, who must provide disclosures, periodic statements, and terms and conditions similar to those of traditional financial institutions. 

He argued that this framework could unfairly disadvantage emerging payment mechanisms while consolidating regulatory control under the guise of consumer protection.

Additionally, Hughes claimed that the alleged “co-opting of crypto” under consumer protection won’t stop until someone does something about it.

The CFPB will accept public comments on the rule until Mar. 31, 2025, signaling that it is open to feedback from all stakeholders, including wallet providers, crypto advocates, and consumers.

The bureau uses the comments to inform its decision-making, although it does not guarantee that the proposed rule will be amended or implemented.

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