Lawmakers discussed a proposal for the Consumer Financial Protection Bureau that would potentially provide oversight of payment applications involving cryptocurrencies.
The proposal, “Defining larger players in the general-purpose digital consumer payment applications market,” aims to regulate non-bank financial companies that process more than 5 million transactions annually, similar to 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 bounds. Rep. Mike Flood, R-Neb., questioned the legitimacy of the CFPB claiming jurisdiction over cryptocurrencies with minimal legal basis.
Conversely, Democratic lawmakers such as Rep. Stephen Lynch, D-Mass., have argued that CFPB oversight is necessary because the volatility of cryptocurrencies causes significant investment losses.
“There is a tremendous amount of risk and volatility in it, but some people say there is no risk-based reason for the CFPB to get into this business,” Lynch said.
The rule explicitly mentions cryptocurrencies several times and has been criticized for expanding the CFPB’s scope into areas such as cryptocurrency trading and self-hosted wallets without clear jurisdiction.
Witnesses and lawmakers, including House Financial Services Committee Chairman Patrick McHenry (R-N.C.) and Rep. French Hill (R-Ark.), expressed concerns about the rule’s ambiguous impact on digital assets.
Amid discussions about regulatory clarity for cryptocurrency companies, Ohio Rep. Warren Davidson highlighted the challenges of seeking clear guidance from regulators.
Law professor Christopher Odinet advocated for the inclusion of cryptocurrencies under CFPB oversight.
“Take the high-profile collapse of cryptocurrency exchange giant FTX as an example,” Odinet said. “It revealed how little was previously known about the true nature of these transactions and the handling of consumer assets.”