CFPB Unveils Groundbreaking Rule to Extend EFTA Safeguards to Gaming and Stablecoin Transactions

On January 2, 2025, the Consumer Financial Protection Bureau (CFPB) put forward an interpretive rule under the Electronic Fund Transfer Act (EFTA) and Regulation E to elucidate how new payment frameworks, including those utilized in video gaming, esports wagering, and the application of stablecoins, integrate into the current regulatory landscape. The Bureau articulated that their initiative is part of a wider undertaking to guarantee that enterprises offering these types of “financial products” have measures in place to safeguard consumers from hacking attempts, theft of accounts, fraud, and unauthorized transactions. The CFPB holds the perspective that without these safeguards, consumers may encounter difficulties asserting their rights in cases of unauthorized transfers or mistakes.

Key Features of the Proposed Rule

Through the interpretive rule, the CFPB intends to broaden EFTA/Regulation E protections to include in-game purchases in video games, esports wagering, and transactions that involve stablecoins. The proposal is built on the Bureau’s investigation and feedback from interested parties, covering the following significant areas:

1. Defining “Funds”:
   • The proposed interpretive rule would establish the definition of “funds” to encompass elements that function similarly to money, including “stablecoins, alongside any other fungible assets in similar situations that either serve as a medium of exchange or a method to settle payments for goods or services.” Thus, it aims to include widely recognized cryptocurrencies and stablecoins, along with in-game digital currencies that can be easily converted back to U.S. dollars. Importantly, the Bureau asserts that what defines “funds” is a “fact-specific” investigation and would not automatically include assets that cannot be utilized for payments or instantly exchanged into fiat currency. (Previous discussions on stablecoins were had here).
2. Defining “Accounts”:
   • The term “account” is characterized in EFTA to include demand deposit accounts, prepaid accounts, and other consumer asset accounts intended for personal, family, or household use.
   • The proposed rule specifies that (i) digital currency wallets employed for purchasing goods and services or facilitating peer-to-peer transactions, (ii) gaming accounts designed for the acquisition of virtual items from various game developers or participants, and (iii) credit card rewards points accounts where consumers can acquire points redeemable for goods from different merchants may also fit within this definition.

Entities subject to EFTA must adhere to particular error resolution and unauthorized transfer liability safeguards as mandated by Regulation E. Companies newly subjected to EFTA under the proposed rule may be obligated to deliver transparent disclosures concerning EFT services, including potential fees, transfer limitations, and error resolution processes.

Request for Information Regarding Privacy Concerns

Request for Information on the Collection, Use, and Monetization of Consumer Payment and Other Personal Financial Data to gain better insight into how gaming companies present financial products and handle consumer data. The goal of the RFI is to evaluate if the Bureau should ponder modifications to Regulation P, the regulation that enforces privacy safeguards under the Gramm-Leach-Bliley Act. Concerning the monetization of consumer data, both the CFPB and the FTC have remained proactive in this area, primarily investigating how major technology firms profit from consumer data. Connected to the Bureau’s Request for Information, the Bureau also published a blog last week soliciting video gamers and parents to share their experiences with gaming assets and transactions.

Implementing the Provisions: EFTA and Regulation E have exemptions for certain securities or commodities transactions. These exceptions cover any transfer of funds primarily intended for buying or selling a security or commodity if, among other conditions, the security or commodity is overseen by the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC). The degree to which digital currencies will be governed as securities by the SEC or as commodities by the CFTC remains unclear. If certain virtual currencies are categorized and regulated as securities or commodities, the transactions in question may be eligible for exemption from EFTA requirements.

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