CFPB: Virtual Currencies ‘Outside Scope’ of Prepaid Card Legislation
The CFPB’s statement of October 6, signaled tighter controls over prepay on consumer protection grounds. However, virtual currencies are “outside the scope” of its update.
“Although the Bureau received some comments addressing virtual currency products and services, the Bureau reiterates that application of Regulation E [the Electronic Funds Transfer Act] and this final rule to such products and services is outside of the scope of this rulemaking,” it said.
The decision follows consultation with both banks and Bitcoin advocates, including the Chamber of Digital Commerce.
In a circular today, the organization said it felt “pleased” with the CFPB’s chosen course of action.
“The Chamber is encouraged that the CFPB has taken its input into account in its new rule, and looks forward to continuing to consider and develop appropriate regulation impacting virtual currencies, digital assets, and blockchain technology with the CFPB,” it added.
Banking Opposition Overturned
The CFPB itself noted, however, that virtual currencies’ status is not set in stone and research continues.
“We note that the CFPB said that it ‘continues to analyze the nature of products or services tied to virtual currencies,’” it similarly confirmed.
The CFPB has conspicuously overturned banking sector lobbying for virtual currency products’ inclusion within Regulation E.
As the statement describes:
“Two trade association commenters representing banks stated that the proposed definition of “prepaid account” should be modified to expressly include accounts funded or capable of being funded with virtual currencies…”
“They asserted that virtual currencies are ‘funds’ under EFTA, and coverage is needed to ensure consumers get the kind of protections they would have if they used other comparable but closely regulated traditional payment systems and products.”
Nonetheless, the CFPB concluded the updated legislation “did not resolve specific issues with respect to the application of either existing regulations or the proposed rule to virtual currencies and related products and services.”
The Rise of Prepaid Cards
Prepaid cards have surged in popularity in the US over the last decade, with the government estimating they will hold $112 billion in value by 2018. Until now, issuers, which deal largely with unbanked customers, circumvent many requirements placed on traditional lenders, and charge significantly higher usage fees.
The virtual currency market has similarly expanded. There is a wide variety of products from jurisdictions throughout the world available internationally, regardless of country of residence and other limiting factors associated with fiat cards.
What do you think about the Bureau’s decision? Let us know in the comments section below!
Images via Shutterstock.
If you would like to know more about consumer spending products tied to Bitcoin or other virtual currencies, check out the Bitcoin.com consumer guides or head to our Forum and ask your questions to the community.