On January 10, 2025, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a proposed interpretive rule that would expand the Bureau’s consumer protection authority under the Electronic Fund Transfer Act (EFTA) and its implementing regulation, Regulation E, to stablecoins, crypto, virtual currencies and other innovative forms of electronic payment, as described below.
While the Trump Administration is unlikely to finalize the proposed interpretive rule, especially given the administration’s support for the development of crypto and other digital assets, the proposed rule’s expansive interpretation of EFTA and Regulation E could still find purchase with civil litigants and state regulators.
Overview of Proposed Interpretive Rule
The EFTA, enacted in 1978, establishes rights, responsibilities and protections for consumers and financial institutions involved in electronic fund transfers (EFTs). Traditionally, these transactions have been understood to include the use of ATMs, debit cards, direct deposits, electronic bill payments, automated clearing house (ACH) payments, and other online or mobile payments, including peer-to-peer (P2P) payments, among others. The CFPB, and previously the Board of Governors of the Federal Reserve System, implemented EFTA through Regulation E, which was initially issued shortly after the statute’s passage in 1978. The CFPB, like the Fed before it, has periodically amended Regulation E to address the emergence of new payment methods and systems, including prepaid accounts in 2016. The Bureau’s proposed rule, however, would represent a more foundational and significant expansion of EFTA’s coverage than has previously been implemented.
EFTA’s coverage is limited to, not surprisingly, “electronic fund transfers.” Congress defined that term to include “any transfer of funds, other than a transaction originated by check, draft, or similar paper instrument, which is initiated through an electronic terminal, telephonic instrument, or computer or magnetic tape so as to order, instruct, or authorize a financial institution to debit or credit an account.” 15 U.S.C. 1693a(7). However, neither EFTA nor Regulation E defines the term “funds,” which serves as the primary lever for the CFPB’s new interpretation of the statute’s coverage.
Specifically, the CFPB proposes to adopt an interpretation of the term “funds” in EFTA that would encompass not only money held in fiat currency (e.g., US dollars) but also any “assets that act or are used like money,” meaning those that “are accepted as a medium of exchange, a measure of value, or a means of payment.” This broader reading of the term “funds” would include, according to the proposed rule, “stablecoins, as well as any other similarly-situated fungible assets that either operate as a medium of exchange or as a means of payment for goods or services.” Examples might include cryptocurrencies (e.g., Bitcoin, stablecoins); central bank digital currencies; proprietary virtual currencies, including those used to purchase or sell digital assets in online gaming platforms such as Roblox; and credit card rewards points, among others.
The CFPB’s legal position is premised on two sources. First, the proposed rule examines various dictionary definitions of the term “funds” from around the time of EFTA’s passage and concludes that the term is often defined by reference to pecuniary resources generally and not limited to actual currency. Second, and more importantly, the CFPB cites several judicial decisions that purport to interpret the term “funds” to include not just money or fiat currency but also assets that could be “readily converted to cash.” These include cases under EFTA—most importantly, the decision in Rider v. Uphold HQ Inc., 657 F. Supp. 3d 491, 498 (S.D.N.Y. 2023), in which a federal district court held that cryptocurrency was a “digital form of liquid monetary assets” and thus should be considered “funds” under EFTA—as well as decisions interpreting state money transmission laws. On those bases, the CFPB reasons, it “has long been clear that the term ‘funds’ in EFTA is not limited to fiat currency like U.S. dollars.”
Based on this broad conception of “funds,” the proposed rule next turns to the term “account” as used in EFTA’s definition of “electronic fund transfer.” Unlike “funds,” Congress did define “account” in EFTA—specifically, the statute provides that an “account” is “a demand deposit, savings deposit, or other asset account . . . as described in regulations of the [CFPB], established primarily for personal, family, or household purposes,” subject to limited exceptions. Looking to legislative history and associated regulatory guidance, the CFPB explains that EFTA was not intended to be limited to transfers of funds into or out of traditional deposit or savings accounts. The proposed rule instead reads the statute’s reference to “other asset account[s]” to encompass any account into which “funds,” as interpreted anew, can be deposited by the consumer and which has features similar to deposit or savings accounts, including the ability to “pay[] for goods or services from multiple merchants, [the] ability to withdraw funds or obtain cash, or conducting person-to-person transfers.”
While the proposed rule acknowledges that a particular payment product’s features will drive the determination of whether it is considered an “account” under EFTA, it nonetheless offers several examples of what may constitute “accounts” under EFTA based on its proposed guidance. These include video game accounts that can be used to purchase digital assets from multiple merchants or players, virtual currency wallets that can be used to purchase goods or services or make P2P payments, and credit card reward points redeemable at multiple merchants. But it is not difficult to imagine other contexts to which the same logic could lead.
Key Takeaways
The proposed rule is one of many rules, reports and other initiatives announced by departing CFPB Director Chopra in the final days of the Biden Administration. It is unlikely that CFPB leadership in the Trump Administration will issue a final interpretive rule expanding the scope of EFTA and Regulation E in this manner. That seems particularly unlikely, given the Trump Administration’s announced support for the development of crypto and other digital asses and desire to reduce regulatory red tape that they content stifles innovation. Indeed, on January 23, President Trump issued an executive order, titled Strengthening American Leadership in Digital Technology, which states that it is the policy of the Trump Administration to support the responsible growth and use of digital assets.
We nonetheless offer several observations:
First, while the proposed rule is the first effort by the CFPB to reinterpret the scope of EFTA to extend it to crypto and other digital assets, it is not necessarily unexpected. More than a year ago, in November 2023, the CFPB previewed its broader understanding of the term “funds” in the context of a proposed rule to define a market for general-use digital consumer payment applications and to extend its supervisory jurisdiction over larger participants in that market. The proposed larger-participant rule, which was finalized in November 2024, noted the CFPB’s view “that, consistent with its plain meaning, the term ‘funds’ in the CFPA is not limited to fiat currency or legal tender, and includes digital assets that have monetary value and are readily useable for financial purposes, including as a medium of exchange. Crypto-assets, sometimes referred to as virtual currency, are one such type of digital asset.” The CFPB’s proposed rule is the logical extension of that stated position, extending the definition of “funds” from the CFPA to EFTA.
Second, while the CFPB’s interpretation of EFTA’s coverage seems unlikely to take effect, it nonetheless will be eagerly adopted by an enterprising plaintiffs’ bar capable of bringing private actions under EFTA against providers of new payment products. The proposal will lend strength to an already surging tide of private litigation under EFTA against financial institutions and, conceivably, increase exposure for providers that may not previously have viewed themselves as being subject to the disclosure, error resolution and other consumer protection obligations imposed by EFTA.
Third, the Chopra CFPB’s proposed reading of EFTA’s coverage may be adopted by state regulators in those states that have analogous laws on electronic fund transfers. For example, Massachusetts has adopted a nearly identical definition of “electronic fund transfer” and extends similar consumer protections under state law, including by limiting consumers’ liability for unauthorized EFTs. In the face of potentially relaxed federal enforcement under EFTA, state regulators may well embrace the CFPB’s reading of EFTA’s coverage and look to apply their own state-specific regimes to new payment offerings.
Fourth, the proposed rule makes no effort to address the practical implications of the CFPB’s expanded view of EFTA and Regulation E. When the Fed considered potential changes to Regulation E to cover stored-value cards in the late 1990s, for example, it carefully considered the implications of extending coverage of Regulation E to a then-emerging form of payment and promulgated a proposed rule that laid out exceptions and adjustments to Regulation E’s disclosure and error resolution obligations that it determined were appropriate. In contrast, the CFPB’s proposed rule does not even attempt to address the potential consequences of the Bureau’s expanded view of EFTA’s scope, suggesting this exercise was more focused on sending a signal to industry, private litigants and states about issues the (presumably) outgoing CFPB leadership team considers important in emerging payments systems than on grappling with the practical implications of imposing existing legal requirements in that context.
The CFPB has called for any comments to be submitted on or before March 31, 2025.
