The U.S. Consumer Financial Protection Bureau (CFPB) has put forward new regulations aimed at strengthening the safeguards for cryptocurrency users, which would require providers to compensate victims of fraud or theft.
The proposal, announced on January 10, seeks to extend the existing financial regulations to cover crypto accounts, treating them in a similar manner to traditional bank accounts. It involves redefining the term “funds” to include cryptocurrencies and other assets used as mediums of exchange. Wallet providers would also be required to inform users about their rights, transaction fees, and options for resolving disputes, while also providing regular updates on any changes to their accounts. The public has until March 31 to provide feedback, after which final decisions will be made.
The aim of the proposal is to address the growing security risks associated with cryptocurrencies, including the $3 billion lost to crypto hacks in 2024. However, it has faced criticism from experts who argue that its broad scope creates uncertainty, particularly for non-custodial wallet developers. Legal professionals such as Jai Massari and Drew Hinkes have called for clearer guidelines, cautioning that vague definitions and impractical requirements, such as provisional credits, could hinder the adoption of these regulations.
Some view the proposed rules as excessive. Bill Hughes from Consensys has criticized the CFPB’s approach, suggesting that unless future U.S. leadership imposes limits, it could stifle innovation. Despite the opposition, the proposal reflects the growing regulatory focus on balancing consumer protection with the complexities of the crypto industry.