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Financial Services Law Insights and Observations

Chopra foreshadows expanding oversight over digital payments

Fintech Federal Issues CFPB Supervision Consumer Protection Digital Assets

Fintech

On October 6, CFPB Director Rohit Chopra spoke at a digital payments event where he described the risks posed by private digital currencies and digital payments systems and provided steps that would increase the CFPB oversight so as to help protect consumers from these risks.

Chopra stated that from a consumer regulator’s perspective, it is important to safeguard against the risks of private currencies issued by nonbanks, which include the potential for sudden devaluation of the digital currency, intrusive data surveillance, censorship, private regulations that favor the issuer’s commercial interests, challenges with error resolution, and consumer fraud.

Further, Chopra shared what he believes are warranted steps to ensure that private digital dollars and payments systems do not harm consumers:

  • The CFPB will issue supplemental orders to certain large technology platforms to acquire more data and information to better ascertain their business practices, especially with respect to the use of sensitive personal data and any issuance of private currencies.
  • To reduce the harms of errors, hacks, and unauthorized transfers, the Bureau will explore providing additional guidance on the applicability of the Electronic Fund Transfer Act with respect to private digital dollars and other virtual currencies for consumer and retail use.
  • The CFPB will use appropriate authorities to conduct supervisory examinations of nonbanks operating consumer payment platforms, including the authority over service providers to large depository institutions and the authority over large participants, which would subject nonbanks meeting a particular size threshold to CFPB supervision.
  • The Bureau will publish a proposed rule regarding personal financial data rights pursuant to Section 1033 of the Consumer Financial Protection Act, which will seek to accelerate America’s shift to open, competitive, and decentralized banking, while also seeking to safeguard against misuse of personal financial data.

Additionally, Chopra stated the Financial Stability Oversight Council should consider exercising its authority under Title VIII of the Dodd-Frank Act to designate activity as, or as likely to become, a systemically important payment, clearing, or settlement activity so as to provide other agencies with critical oversight and tools to ensure that a stablecoin is actually stable.