CFPB proposes requiring digital asset businesses to refund customers for hacks, aligning crypto wallets with banking standards.
CFPB Proposes Tougher Crypto Wallet Protections
The Consumer Financial Protection Bureau (CFPB) has introduced a proposal to enhance customer protections for cryptocurrency wallets. Under the new rules, crypto companies would be required to refund customers for funds lost to hacks or unauthorized transactions.
Aligning Crypto Wallets with Banking Standards
The proposal seeks to extend the Electronic Fund Transfer Act’s protections to include digital assets. This would cover stablecoins and other fungible assets used as mediums of exchange. The move aims to align crypto wallet protections with those of traditional bank accounts.
Hacking Remains a Major Concern
Hacking incidents in the crypto sector surged in 2024, with 303 global attacks resulting in $2.2 billion in losses, according to Chainalysis. North Korean groups accounted for $1.34 billion of these losses, highlighting the urgency for improved security measures.
Impact on Crypto Businesses
The proposed rule would require exchanges and custodians holding crypto for customers to bolster their security and maintain sufficient reserves. This ensures they can refund users in cases of hacks or operational errors.
Political Shifts and Regulatory Future
The proposal comes amid a political transition, with President Trump taking office. His administration has voiced support for the crypto industry, with key advisers Elon Musk and Vivek Ramaswamy criticizing the CFPB. Trump’s backing suggests a potential shift in regulatory priorities.
Broader Scope for Digital Assets
CFPB’s proposal includes protections for virtual currency wallets, video game accounts with purchasable items, and credit card reward points used across merchants. Industry stakeholders have until March 31 to provide feedback before a final decision is made.
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