CFPB Proposes New Rule for Crypto Firms to Reimburse Fraud Victims

The Consumer Financial Protection Bureau (CFPB) has proposed a new rule to enhance protections for cryptocurrency users, aiming to hold service providers accountable for reimbursing users who lose funds to fraud or theft. Key aspects of the proposal include:

Extension of the Electronic Fund Transfer Act (EFTA) to cover cryptocurrency accounts.
Redefinition of "funds" to include cryptocurrencies, ensuring alignment with traditional banking standards.
Requirements for wallet providers to disclose consumer rights, including liability for unauthorized transactions and error resolution processes.
Mandatory notifications for changes in terms and conditions.

This rule aims to protect users, particularly those of stablecoins, amid rising cyber threats, which caused around $3 billion in losses in 2024. However, concerns have been raised regarding:

Vagueness of language potentially excluding non-custodial wallets.
Practicality of some requirements as highlighted by legal experts.
Regulatory overreach warnings from industry representatives.

Public feedback is open until March 31, after which the CFPB will determine the next steps. The success of the proposal hinges on addressing these critical concerns.