Legislators deliberated on the proposal put forth by the Consumer Financial Protection Bureau regarding the potential oversight of payment applications, including those involving cryptocurrency. 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, imposing similar regulatory requirements as those for banks and credit unions.
During the hearing, some members of the House Financial Services subcommittee raised concerns about the CFPB overstepping its authority. Representative Mike Flood, R-Neb, questioned the legality of the CFPB’s jurisdiction over cryptocurrencies with limited legal basis. On the other hand, Democrats like Representative Stephen Lynch, D-Mass, argued in favor of CFPB oversight due to the unpredictable nature of cryptocurrencies, which has resulted in substantial investment losses.
Lynch emphasized, “There’s a significant amount of risk and volatility involved, and yet some argue that there is no valid reason for the CFPB to intervene in this area.”
The rule specifically references cryptocurrencies multiple times and has faced criticism for allegedly expanding the CFPB’s reach into areas such as crypto transactions and self-hosted wallets without clear jurisdiction. Witnesses and lawmakers, including House Financial Services Committee Chair Patrick McHenry, R-N.C., and Representative French Hill, R-Ark., have expressed concerns about the rule’s ambiguous implications for digital assets.
In the midst of discussions surrounding regulatory clarity for cryptocurrency companies, Representative Warren Davidson, R-Ohio, highlighted the challenges in obtaining clear guidance from regulatory bodies. Law professor Christopher Odinet supported the inclusion of cryptocurrencies under CFPB supervision, citing the high-profile collapse of the crypto exchange giant FTX as an example of the lack of understanding regarding the true nature of these transactions and the management of consumer assets.