New US Rule Could Force Crypto Providers to Compensate Fraud Victims

[Freemind]

It's confusing because it's general. If they aren't naming who's going to be responsible for compensating victims they're upsetting the market. The speculating won't help any body.

I don't see anything confusing. From what we have been able to read, although they do not name who will be responsible for paying these compensations, the most logical thing is that the exchanges (or company) themselves are in charge of paying. This will require not only an increase in system security efforts and therefore an increase in budgets, but will also mean that insurance budgets will have to be increased, to be able to face possible catastrophes. One of the negative aspects of all this is that exchanges may require an increase in KYC-related monitoring and also an increase in fees for the aforementioned budgets.

[yhiaali3]

There are some strong exchanges that did this voluntarily without being forced by law, such as Binance and KuCoin, when they were hacked, they compensated their users to preserve their reputation.

As for forcing this compensation on the platforms that were hacked, I think it is unfair and will be a very heavy burden on these services that were just hacked and lost a large part of their budget, which may lead to their bankruptcy and stop working.

[Freemind]

There are some strong exchanges that did this voluntarily without being forced by law, such as Binance and KuCoin, when they were hacked, they compensated their users to preserve their reputation.

This is only partially true. Binance several years ago (in 2019) attempted to roll back the Bitcoin network after an attack in which 8,000 Bitcoins were hacked from the exchange. Finally CZ abandoned that "brilliant" idea.

As for forcing this compensation on the platforms that were hacked, I think it is unfair and will be a very heavy burden on these services that were just hacked and lost a large part of their budget, which may lead to their bankruptcy and stop working.

Unfair?. I don't think it's unfair. The most important thing in any business is customers, if you don't take care of your customers your business should not exist. Maybe a possible solution would be to have a lower profit percentage and use that money to increase the security budget.

[Crypto_Accountants]

This proposal raises critical concerns. If it applies to non-custodial wallets, it’s unrealistic, as users control their private keys. Forcing wallet providers to compensate victims without recovering funds could lead to severe financial losses, stifling innovation. A better approach would be emphasizing security measures and fraud prevention rather than placing undue burdens on providers.

[yhiaali3]

As for forcing this compensation on the platforms that were hacked, I think it is unfair and will be a very heavy burden on these services that were just hacked and lost a large part of their budget, which may lead to their bankruptcy and stop working.

Unfair?. I don't think it's unfair. The most important thing in any business is customers, if you don't take care of your customers your business should not exist. Maybe a possible solution would be to have a lower profit percentage and use that money to increase the security budget.

Of course, protecting customers is the basis of any service, but I meant that it is unfair to small platforms because it may lead to the platform's bankruptcy and closure. This hacked platform lost a large part of its budget as a result of hacking, and imposing compensation on those directly affected may lead to its bankruptcy and closure because its budget cannot bear all this burden.

For example, a compensation plan can be put in place in stages that do not lead to the platform's closure. The law must be fair to both parties, this is my opinion.

[NotATether]

The article's saying $3B was lost in cryptos hacks in 2024 so if ppl get compensated who's going to pay ?

The rule aims to hold crypto service providers accountable for compensating users who lose funds to theft or fraud... Read more here.

What is going to happen from this is that the CFPB will make a few companies make 'token repayments' when they suffer a major scam in the future, but the overwhelming number of exchanges will implement anti-scam measures, by adding directories of services and their payment links, then by freezing the transactions before the user can finish them and make the user check everything or simply block them from doing that transaction quietly. Why? Because they won't want to pay any fine.

I think this is a good idea. It was done by Coinbase during the 2020 Twitter phishing campaign too.

[arabspaceship123]

If anti-scam measures were implemented by exchanges do you believe they won't be forced to compensate victims of fraud ?

What is going to happen from this is that the CFPB will make a few companies make 'token repayments' when they suffer a major scam in the future, but the overwhelming number of exchanges will implement anti-scam measures, by adding directories of services and their payment links, then by freezing the transactions before the user can finish them and make the user check everything or simply block them from doing that transaction quietly. Why? Because they won't want to pay any fine.

I think this is a good idea. It was done by Coinbase during the 2020 Twitter phishing campaign too.

[bitterguy28]

New US Rule Could Force Crypto Providers to Compensate Fraud Victims

I have so many concern about this proposal. It's not clear whether it only applies to custodial wallet or also apply to non-custodial wallet.

i agree that there is some confusion here this seems like a good rule but due to its vagueness it can be easy to manipulate and abuse this rule

In addition, the wallet provider would suffer major loss if they forced to compensate the victim, but can't take the money back from the hacker/scammer. Your opinion is greatly appreciated.

that is my concern too what if the user is the one who has put himself and his wallet and money in danger? would the provider still have to compensate the victim? i would not be surprised if many wallets stricten their rules because of this

[Freemind]

that is my concern too what if the user is the one who has put himself and his wallet and money in danger? would the provider still have to compensate the victim? i would not be surprised if many wallets stricten their rules because of this

I think the rule the article refers to is in case a service like an exchange or staking platform (for example) has problems, not the personal wallet that anyone can install on a device. The security of the devices and wallets installed by each person would be outside that rule and the responsibility would fall solely on the user. Otherwise, it would not be possible, or very difficult, to prove that the wallets have been hacked or that the funds have simply been sent to another wallet of the same owner.

[Faisal2202]

I have so many concern about this proposal. It's not clear whether it only applies to custodial wallet or also apply to non-custodial wallet. In addition, the wallet provider would suffer major loss if they forced to compensate the victim, but can't take the money back from the hacker/scammer. Your opinion is greatly appreciated.

Well, this is a good step in my sight because if all of the crypto platforms out there in USA have to give their customers their money back in any condition then they will make their platform more secure and the chances for them to rug pull will also decrease because if this law passes, they have to first comply with it, and once they do that, they can't run away, CMIIW.

Speaking of wallets, they have made things clear in the article that, the wallet providers have to just make their terms and conditions and new rules according to the CFPB clear to the users once this proposal got accepted. They don't have to give the funds of the users back they just had to make sure their users know that (risk).

[Gposas]

New US Rule Could Force Crypto Providers to Compensate Fraud Victims

The US Consumer Financial Protection Bureau (CFPB) has unveiled a proposal that could redefine consumer protections in the cryptocurrency sector.

The rule aims to hold crypto service providers accountable for compensating users who lose funds to theft or fraud... Read more here.


I have so many concern about this proposal. It's not clear whether it only applies to custodial wallet or also apply to non-custodial wallet. In addition, the wallet provider would suffer major loss if they forced to compensate the victim, but can't take the money back from the hacker/scammer. Your opinion is greatly appreciated.

My view from the article, is that the CFBP is indirectly telling the Crypto providers be it exchange or wallet to increase the protection of their platforms to avoid case of scam and fraudulent activities. If these platforms can't provide 100% security of customers funds, then their liability to fraud is sure.

In addition, in a situation of hack, the Crypto platform wouldn't be able to payback customer's lost funds because even the platform would already be on its own loss... And this possibly can lead to the folding up of the platform...
Or else they have a counterattack to emergency situations like this, maybe a funds reserve or some locked funds kept somewhere else.

[AlphaBeta]

All types of fraud relating to crypto or just the ones where fraud is as a result of issues from the crypto provider? This looks very vague, I'm curious about how this would work when you get scammed as a result of your own negligience, surely the crypto provider can't be held resposible for that.

[arabspaceship123]

It's vague there isn't detailed info yet so until it's announced with a plan we don't know how a new rule could force ppl to compensate fraud victims. We're making assumptions.

[bitterguy28]

It's vague there isn't detailed info yet so until it's announced with a plan we don't know how a new rule could force ppl to compensate fraud victims. We're making assumptions.

for all we know that is all there is it is not exactly uncommon for rules and regulations to be vague so that they can spin it any way they want it to sometimes a government releases a law that is difficult to understand and has unclear bases i would not be surprised if this was the case considering how there is a lot of things to cover in crypto and there are so many exceptions to be made just the safest way is to make it vague

[arabspaceship123]

They've got to make all the rules clear. America's changed it's leadership with a new team so we'll see how Elon Musk & Donald Trump bring new crypto laws.

for all we know that is all there is it is not exactly uncommon for rules and regulations to be vague so that they can spin it any way they want it to sometimes a government releases a law that is difficult to understand and has unclear bases i would not be surprised if this was the case considering how there is a lot of things to cover in crypto and there are so many exceptions to be made just the safest way is to make it vague