Republican leadership on the House Financial Services Committee says that a proposed rule from the Consumer Financial Protection Bureau would have an unclear impact on digital assets. The lawmakers have sent a letter to CFPB Director Rohit Chopra asking the agency to take a step back.
The rule would give the CFPB the ability to supervise “larger nonbank companies” that have services like digital wallets and payment apps. It would require large, non-financial digital payment providers that handle more than five million transactions annually to come under the same regulation as banks, credit unions, and other FIs currently under the supervision of the CFPB.
The letter says the rule, “Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications,” is not clear on whether it would apply to specific digital asset entities. They also asked for the comment period, which closed on January 8, to be reopened. The letter was signed by House Financial Services Committee Chair Patrick McHenry, R-N.C., and Reps. French Hill, R-Ark., and Mike Flood, R- Neb.
Uncertainty and Lack of Clarity
“The Bureau’s approach creates more regulatory uncertainty that could undermine the digital asset industry’s functionality with respect to digital asset transactions,” the letter said. The proposed rule says it would not cover fiat-to-crypto and crypto-to-crypto transactions on an exchange. But the lawmakers contend that “it remains unclear if this exclusion would exempt digital asset exchanges entirely, or only in instances where they offer services limited to the conversion of fiat-to-crypto and crypto-to-crypto transactions. If the latter is true, then digital asset exchanges may be dissuaded from expanding their services to allow for peer-to-peer transactions through wallets hosted on the platform.”
Industry observers agree that the CFPB has not provided enough clarity about which aspects of the digital assets industry it has jurisdiction over.
“This is a part of the ongoing struggle that participants in the crypto space are having with U.S. regulators, namely the lack of clarity about which agency has authority over which part of the industry as it evolves,” said James Wester, Director of Digital Assets and Crypto at Javelin Strategy & Research.
“In this case, a big issue is that the CFPB seems to be claiming authority over companies and use cases that are not under the purview of an agency protecting consumers,” Wester said. “The letter from the Republican representatives, like letters from industry advocacy organizations, is simply trying to get answers from the CFPB about how unclear language in the rules it is drafting fit with its larger mission and how enforcing those rules won’t cause unintended harm to a still-developing industry.”
