Whereas the U.S. Federal Trade Commission and the Consumer Financial Protection Bureau have largely taken a backseat to the SEC and CFTC, a closer examination of Biden’s executive order on cryptocurrencies actually directs the CFPB and the FTC to more closely study how they can police cryptocurrency transactions for fraud and abuse.
In a move similar to Singapore’s approach to cryptocurrencies, which is to protect retail investors and consumers from the volatility inherent in the digital asset class, the FTC and CFPB will protect consumers against “unfair” and “deceptive” acts and practices, with the CFPB having additional powers to prosecute “abusive” acts and practices.
Given how the vast majority of traders on various cryptocurrency exchanges continue to be retail, these broad enforcement agencies could play a major role in the development of cryptocurrencies and centralized exchanges in the U.S., especially in key areas like fraud protection and consumer privacy.
Because the U.S. approach to cryptocurrencies thus far has been to leave it to the CFTC and SEC, which treat them as commodities and securities respectively, frauds that aren’t covered by those definitions, such as false advertising, aren’t covered by federal regulators.
Yet with some studies finding that as much as a quarter of Americans having exposure to cryptocurrencies, consumer protection could help stabilize the market, by providing a bigger oversight umbrella, especially for cases which fall outside of the ambit of the SEC and CFTC.
But Biden’s executive order, calling for more consumer protection and oversight, is also tacit recognition that for a segment of Americans at least, cryptocurrencies could be replacing traditional systems for transactions.
Because the CFPB also oversees customer information and data breaches, cybersecurity at cryptocurrency exchanges operating in the U.S. would need to be beefed up and that could provide the assurance that more consumers need to adopt the nascent asset class.
Perhaps most significant, Biden’s executive order will force agencies like the CFPB, FTC, SEC and CFTC to lay down the rules on who does what on cryptocurrency regulations, avoiding the unnecessary and unproductive turf wars, like those between the FBI and CIA, which let the 9/11 terrorists slip through the cracks.
