A recent hearing among lawmakers centered on the Consumer Financial Protection Bureau’s (CFPB) proposal to potentially extend its oversight to payment applications, including those involving cryptocurrency.
The proposal, titled “Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications,” seeks to regulate nonbank financial companies processing over five million transactions annually, aligning them with regulatory requirements for banks and credit unions.
During the hearing, members of the House Financial Services subcommittee expressed various concerns regarding the CFPB’s proposed expansion. Representative Mike Flood, R-Neb, questioned the legal grounds for the CFPB to claim jurisdiction over cryptocurrencies, citing minimal legal basis.
In contrast, Democrats such as Representative Stephen Lynch, D-Mass, argued in favor of CFPB oversight due to the volatile nature of cryptocurrencies, which has resulted in significant investment losses.
“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,” Lynch stated.
The proposal explicitly mentions cryptocurrencies multiple times and has faced criticism for potentially extending the CFPB’s authority into areas like 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., raised concerns about the rule’s ambiguous implications for digital assets.
Amid discussions on regulatory clarity for cryptocurrency firms, Representative Warren Davidson, R-Ohio, highlighted the challenges in seeking definitive guidance from regulatory bodies.
Christopher Odinet, a law professor, advocated for including cryptocurrencies under CFPB supervision, citing instances like the collapse of the crypto exchange giant FTX, which exposed gaps in understanding the nature of these transactions and the handling of consumer assets.
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