American watchdog warns crypto payment wallet users
The United States Consumer Financial Protection Bureau (CFPB) warned US citizens over digital payment app users and claimed that their money may not be insured by FDIC.
In the present time, crypto businesses operate services in the US on behalf of traditional financial policies. We can say that there are no rules for the crypto sector & this situation is creating huge stress for the crypto firms to comply with the regulatory bodies, as every business wants to remain away from any legal action.
On 1 June 2023, The United States Consumer Financial Protection Bureau (CFPB) issued a warning for citizens to remain aware of direct digital payment services.
According to CFPB, the majority of the P2P digital payments apps are providing payment services & encouraging customers to hold funds on the Digital wallet directly.
The CFPB body explained that such P2P digital nonbanking apps & services are not insured by FDIC, so in case of any bankruptcy or downfall people will lose all their funds & in that situation, no one government body will help.
By addressing the bankruptcy of several crypto companies, including FTX’s downfall, the CFPB body named several P2P digital payment apps e.g. PayPal, Venmo, Cash App, Apple Pay, and Google Pay.
Issued warnings noted that such digital payment apps offer stored value services that closely resemble deposit accounts.
Furthermore, the explanation noted that funds held by PayPal or Venmo in their program banks may be eligible for pass-through insurance, but funds that have been invested by the providers are not eligible. Customers may not know where their deposits are stored.
Such digital P2P payment apps provide a small % of return & some other benefits for the customers for holding funds in the digital wallet app. Such service providers use customers’ funds to invest in other startup businesses. So if that startup business will face downfall then in that situation the service provider (s) may fail to pay back to the customers.
Read also: American policymakers trying to bring clarity over crypto rules with a new bill
