On January 2, 2025, the Consumer Financial Protection Bureau (CFPB) proposed an interpretive rule under the Electronic Fund Transfer Act (EFTA) and Regulation E to clarify how emerging payment systems, such as those used in video games, esports betting, and the use of stablecoin, fit within the existing regulatory framework. According to the Bureau, their actions are part of a broader effort to ensure that companies offering these types of “financial products” have mechanisms in place to protect consumers against hacking attempts, account theft, scams, and unauthorized transactions. It is the CFPB’s belief that absent these protections, consumers may face challenges vindicating their rights in the event of unauthorized transfers or errors.

Key Highlights of the Proposed Rule

Under the interpretive rule, the CFPB would expand EFTA/Regulation E protections to in-game transactions in video games, esports betting, and transactions involving stablecoins. The proposal builds on the Bureau’s research and input from stakeholders, touching on the following notable areas:

1. Defining “Funds”:
   • The proposed interpretive rule would define the term “funds” to include assets that are used like money which include “stablecoins, as well as any other similarly-situated fungible assets that either operate as a medium of exchange or as a means of paying for goods or services.” Accordingly, it is intended to include widely held cryptocurrencies and stablecoins, as well as in-game virtual currencies that can be easily exchanged back to U.S. dollars. Notably, the Bureau states that what constitutes “funds” is a “fact-specific” inquiry and would not necessarily encompass funds that cannot be used to make payments or cannot be readily exchanged into fiat currency. (We previously discussed stablecoins here). 
2. Defining “Accounts”:
   • The term “account” is defined in EFTA to encompass demand deposit accounts, prepaid accounts, and other consumer asset accounts established for personal, family, or household purposes.
   • The proposed rule adds that (i) digital currency wallets used to buy goods and services or facilitate peer-to-peer transfers, (ii) gaming accounts used to purchase virtual items from multiple game developers or players, and (iii) credit card rewards points accounts where consumers can buy points that can be used to purchase goods from multiple merchants may also fall under this category.

Market participants subject to EFTA must comply with certain error resolution and unauthorized transfer liability protections under Regulation E. Companies newly subject to EFTA under the proposed rule may be required to provide clear disclosures regarding EFT services, including fees, transfer limits, and error-resolution procedures.

Request for Information on Privacy Issues

Separate from the interpretive rule, the CFPB also issued a Request for Information Regarding the Collection, Use, and Monetization of Consumer Payment and Other Personal Financial Data to better understand how gaming companies offer financial products and collect and use consumer data. The purpose of the RFI is to assess whether the Bureau should consider changes to Regulation P, the rule that implements the privacy protections under the Gramm-Leach-Bliley Act. When it comes to the monetization of consumer data, both the CFPB and the FTC have been relatively active in this space, focused on how Big Tech companies monetize consumer data. Related to the Bureau’s Request for Information, the Bureau also published a blog last week asking video gamers and parents to share their experiences with gaming assets and transactions. 

Putting It Into Practice: EFTA and Regulation E contain exceptions for certain securities or commodities transactions. These exceptions include any transfer of funds primarily purposed to buy or sell a security or commodity if, among other things, the security or commodity is regulated by the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC). It remains to be seen to what extent digital currencies will be regulated under the SEC as securities or under the CFTC as commodities. Should certain virtual currencies be classified and regulated as securities or commodities, subject transactions could be exempted from EFTA requirements.

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