The U.S. Consumer Financial Protection Bureau (CFPB) has proposed new rules to enhance protections for cryptocurrency users, which would require providers to compensate victims of fraud or theft.
Announced on January 10, the framework aims to extend existing financial regulations to crypto accounts, treating them similarly to traditional bank accounts. The proposal includes redefining the term “funds” to include cryptocurrencies and other assets used as mediums of exchange. Wallet providers would also be obligated to inform users about their rights, transaction fees, and options for resolving disputes, while providing regular updates on changes to their accounts. The public can provide feedback on the proposal until March 31, after which final decisions will be made.
While the proposal aims to address the increasing security risks in the cryptocurrency space, including the $3 billion lost to crypto hacks in 2024, it has faced criticism. Experts argue that its broad scope creates uncertainty, particularly for developers of non-custodial wallets. Legal professionals like Jai Massari and Drew Hinkes have called for clearer guidelines, warning that vague definitions and impractical requirements, such as provisional credits, could hinder adoption.
Some view the proposed rules as overreach. Bill Hughes from Consensys criticized the CFPB’s approach, suggesting that it could stifle innovation unless it is restrained by future U.S. leadership. Despite the pushback, the proposal reflects the increasing regulatory focus on balancing consumer protection with the complexities of the cryptocurrency space.