The CFPB’s proposal, its first attempt to regulate cryptocurrencies and stablecoins, is unlikely to survive the administration change.

By Parag Patel, Adam Bruce Fovent, and Deric Behar

On January 10, 2025, the Consumer Financial Protection Bureau (CFPB) issued a proposed interpretative rule that would extend the consumer protections of the Electronic Funds Transfer Act (EFTA) to certain stablecoin and other virtual currency accounts, video game accounts, and credit card rewards points accounts (the Proposed Interpretation).1 In issuing the Proposed Interpretation, the CFPB seeks to ensure consistent application of the EFTA to emerging payment mechanisms and protect consumer rights in the event of unauthorized transfers and other errors.

However, coming a little more than a week before President Trump’s inauguration, the Proposed Interpretation is unlikely to gain significant traction in its current form. As President Trump’s first term illustrated, and with the CFPB under ongoing scrutiny and criticism, a recalibration of the agency’s regulatory and enforcement approach and priorities is likely on the horizon.

With the Trump administration signaling both a deregulatory and digital asset-friendly approach, the role of the CFPB with respect to stablecoins and emerging payment mechanisms will be an area of intersecting interests to watch regardless of the fate of the Proposed Interpretation.

Background on the EFTA and Regulation E

The EFTA was originally adopted in 1978 after the advent of the ATM and electronic funds transfers to guard against errors and fraud. It has been applied broadly and flexibly to provide consumer protections as electronic payment networks and mechanisms continued to evolve. Congress originally granted rulemaking authority under the EFTA to the Board of Governors of the Federal Reserve System and later to the CFPB. Regulation E is the principal implementing regulation under the EFTA.

The consumer protections under the EFTA and Regulation E include, for example:

  • required initial disclosures by financial institutions of the terms and conditions of an electronic fund transfer service;
  • limits on consumers’ liability for unauthorized electronic fund transfers; and
  • error investigation and resolution obligations for financial institutions. Importantly, the EFTA provides for both public enforcement through agency actions and private enforcement through individual and class actions for damages.2

Scope and Implications of the Proposed Interpretation

The protections of the EFTA and Regulation E “apply to an electronic fund transfer (EFT) that authorizes a ‘financial institution’ to debit or credit a consumer’s ‘account.’ The term ‘electronic fund transfer’ generally means any transfer of ‘funds’ that is initiated through an electronic terminal, telephone, computer, or magnetic tape for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit a consumer’s account.”

If adopted, the Proposed Interpretation would formalize the following interpretive positions under the EFTA and Regulation E:

  • Financial Institutions: The Proposed Interpretation reiterates that this term would include not only banks, savings associations, and credit unions, but also “nonbank entities that directly or indirectly hold an account belonging to a consumer, or that issue an access device and agree with a consumer to provide EFT services.”
  • Funds: Under the Proposed Interpretation, “funds” (not defined under the EFTA or Regulation E) would not be limited to fiat currency, but would include assets that act or are used like money (i.e., “accepted as a medium of exchange, a measure of value, or a means of payment”). The Proposed Interpretation expressly identifies stablecoins as meeting this interpretation. Notably, the CFPB also went further, indicating that the term would also include “any other similarly situated fungible assets that are used as a medium of exchange or as a means of paying for goods or services,” which would encompass many cryptocurrencies and digital asset tokens.
  • Accounts: Subject to certain exceptions, the EFTA and Regulation E define an “account” to mean a checking account, savings account, or other consumer asset account “established primarily for personal, family, or household purposes.” Under the Proposed Interpretation, “other consumer asset accounts” would include accounts that are not checking or savings accounts, but “into which funds can be deposited by a consumer or on their behalf and which have features of deposit or savings accounts” (such as the ability to pay for goods or make person-to-person transfers). Accordingly, depending on the facts and circumstances, any of the following may qualify as an “account” for EFTA and Regulation E purposes under the Proposed Interpretation: (1) Video game accounts that can be used to purchase virtual items from multiple game developers or players; (2) Stablecoin and virtual currency wallets that can be used to buy goods and services or make person-to-person transfers; (3) Credit card rewards points accounts that allow consumers to buy points that can be used to purchase goods from multiple merchants.

The Proposed Interpretation would also address the scope of the exceptions from the EFTA and Regulation E for electronic fund transfers in connection with the purchase or sale of a security or commodity regulated by the SEC or the CFTC. The Proposed Interpretation would further clarify that these exceptions are limited to transfers with the primary purpose of making a purchase or sale of such security or commodity but would not apply if the securities or commodities are being used as “funds” in an “account” to purchase other goods or services.

Comments on the Proposed Interpretation are due by March 31, 2025.