US lawmakers push back on proposed CFPB rule, citing potential impact on crypto

Leaders of the United States House Financial Services Committee and Subcommittee on Digital Assets, Financial Technology and Inclusion called for a longer comment period on a proposed rule from the Consumer Financial Protection Bureau (CFPB), claiming its impact on the digital asset space would be “unclear” if implemented.

In a Jan. 30 letter to CFPB Director Rohit Chopra, Representatives Patrick McHenry, Mike Flood and French Hill questioned how a November 2023 proposal “would apply to specific entities within the digital asset ecosystem.” The CFPB rule suggested extending its supervisory authority  over depository institutions, including digital assets in its definition of “funds,” and allowing it to target wallets.

The three lawmakers said a lack of clarity for affected crypto exchanges could dissuade firms from allowing peer-to-peer transactions through wallets hosted on the platforms. They requested the CFPB open the proposal to public comments for an additional 60 days, accepting and considering feedback on crypto.

#NEW : Chairman @PatrickMcHenry , Subcommittee Chairman @RepFrenchHill , and @USRepMikeFlood sent a letter to @CFPB Director Rohit Chopra urging his agency to revisit its larger participants digital consumer payment proposed rule.

⬇️ Read more https://t.co/CYczuI681v pic.twitter.com/W2kYVmQEM4

— Financial Services GOP (@FinancialCmte) January 30, 2024

“Peer-to-peer transactions through ‘self-hosted wallets’ is a core component for the digital asset ecosystem, as it eliminates third-party risk,” said the letter. “Capturing certain digital asset wallet providers, who themselves do not maintain an ongoing relationship with consumers, would essentially introduce regulatory risk. [...] We urge the CFPB to refrain from pursuing such a broad definition.”

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The Crypto Council for Innovation said on Jan. 8 that it had “deep concerns” about the proposed rule’s impact on the crypto space, claiming it could “increase regulatory fragmentation.” The advocacy group proposed the CFPB not extend its authority over the digital asset space, hinting at waiting for Congress to provide an appropriate regulatory framework.

McHenry, who chairs the House Financial Services Committee, announced in December 2023 that he will not seek reelection for a new term starting in January 2025. According to many polls, control of the U.S. House of Representatives could come down to a coin flip in 2024, as all 435 seats will be up for grabs.

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