Debate Among Legislators Surrounds CFPB’s Supervision of Payment Applications and Cryptocurrencies
Lawmakers held a discussion regarding a proposal from the Consumer Financial Protection Bureau (CFPB) that could potentially bring payment applications, including those involving cryptocurrencies, under its oversight. The proposal, titled “Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications,” aims to regulate nonbank financial companies that process over five million transactions annually, similar to the regulatory requirements for banks and credit unions.
During the hearing, some members of the House Financial Services subcommittee expressed concerns about the CFPB overstepping its boundaries. Representative Mike Flood, a Republican from Nebraska, questioned the legality of the CFPB claiming jurisdiction over cryptocurrencies with minimal legal basis.
On the other hand, Democrats like Representative Stephen Lynch from Massachusetts argued for the necessity of CFPB oversight due to the volatile nature of cryptocurrencies, which has resulted in significant investment losses. Lynch stated, “There’s a huge amount of risk and volatility in that, and yet there are some who say there’s no risk-based reason for the CFPB to venture into this.”
The rule specifically mentions cryptocurrencies multiple times and has faced criticism for allegedly extending the CFPB’s authority into areas such as crypto transactions and self-hosted wallets without clear jurisdiction. Witnesses and lawmakers, including House Financial Services Committee Chair Patrick McHenry from North Carolina and Representative French Hill from Arkansas, have expressed concerns about the rule’s vague implications for digital assets.
Amid discussions on regulatory clarity for cryptocurrency firms, Representative Warren Davidson from Ohio highlighted the challenges in seeking definitive guidance from regulatory bodies. Christopher Odinet, a law professor, advocated for including cryptocurrencies under CFPB supervision, citing the high-profile collapse of the crypto exchange giant FTX as an example of the lack of knowledge about the true nature of these transactions and the handling of consumer assets.
