On April 1, 2019, the CFPB’s new Prepaid Rule takes effect, which extends Regulation E’s coverage to “prepaid accounts.” While much of the focus has been on how the new rule impacts traditional prepaid card issuers, the Prepaid Rule is sufficiently broad that it could apply to certain virtual currency wallets – and the CFPB has notably stated only that the application of the Prepaid Rule to virtual currencies is outside the scope of that particular rulemaking, not that virtual currencies themselves are outside the scope of Regulation E.
As a threshold matter, and before analyzing whether the virtual currency wallet is a "prepaid account," the analysis will on whether the virtual currency wallet accesses an "account." Regulation E defines "account" very broadly to include, in part, a "consumer asset account…held directly or indirectly by a financial institution and established primarily for personal, family, or household purposes." "Financial institution" is likewise broadly defined and basically means any person that directly or indirectly holds an account belonging to a consumer. Therefore, nothing in Regulation E clearly exempts or excludes an entity that directly or indirectly holds a consumer account that contains virtual currency.
The definition of "Prepaid Account" under Regulation E includes, among other things, any account that has a primary function of conducting person-to-person transfers (including both consumer to consumer and consumer to business transfers),so long as it is not a bank checking or demand account, and is not subject to an applicable exclusion.
Therefore, if a virtual currency wallet can be loaded with funds (which is not defined and could plausibly include at least certain types of virtual currency), its primary purpose is to allow person-to-person transfers, and it is not otherwise exempt, then it may be considered a prepaid account and trigger application of the Prepaid Rules.