COMPLAINTS OF UNNECESSARY REPORTING
CFPB announces a campaign to regulate so-called prepaid cards to avoid money laundering. In a lawsuit filed with the U.S. District Court for the District of Columbia, PayPal claims that the rules for prepaid cards were not correctly applied to digital wallets that work on a completely different basis.
The rules for prepaid cards were updated in April 2019 and acted as part of the “Prepaid Accounts in accordance with the Law on Electronic Transfer of Funds (Regulation E). However, PayPal argues that the rules should not apply to digital wallets that perform completely different operations, and regulation will lead to cumbersome reporting and unnecessary restrictions for users.
The resulting regulatory regime is fundamentally unsuitable for PayPal digital wallets and can be misleading or cofuseing consumers ... The rule obliges PayPal to disclose information about fees that PayPal does not charge and distort the actual fees paid by most customers.
Digital wallets allow users to link their bank accounts and cards and use them faster in a web environment. But PayPal accounts also allow you to store additional funds, which, according to CFPB, creates a case similar to prepaid cards. PayPal also complained that the reporting required by regulators was incomplete and confused users.
PAYPAL STAYS AWAY FROM LINKS TO CRYPTO SPACE
It is currently unclear whether the lawsuit will affect genuine digital wallets associated with crypto coins and tokens. So far, these wallets are not used to transfer money, as is commonly understood. However, cryptocurrency companies that offer cards can also monitor their activities more carefully or to a limited extent.
Prepaid cards allow you to store a relatively limited amount of funds and, thus, can partially circumvent laws on money laundering. PayPal can be used in a similar way, although there are restrictions on outgoing funds.
As fintech expands, reporting rules become more complex, which limits the use of funds through digital wallets. PayPal is also currently facing competition from other payment platforms such as Robinhood and Abra, which combine fintech solutions and cryptocurrency access.
o far, PayPal has avoided cryptocurrency relationships and has banned sending funds to exchanges. The payment company also withdrew from the Facebook Scales Association, fearing further regulatory consequences.