US Legislators Seek Clarity on CFPB Rule's Impact on Cryptocurrency

In a letter dated January 30, representatives Patrick McHenry, Mike Flood, and French Hill posed questions to CFPB Director Rohit Chopra regarding how the November 2023 proposal would apply to specific entities within the digital asset ecosystem. The CFPB rule aimed to expand its supervisory authority over depository institutions, including digital assets under the definition of "funds," and permit the bureau to regulate wallets.

The three legislators expressed concerns about the lack of clarity regarding affected cryptocurrency exchanges, which could deter firms from allowing peer-to-peer transactions through platform-hosted wallets. They requested that CFPB open the proposal for public discussion for an additional 60 days, considering feedback on its impact on cryptocurrency.

"Peer-to-peer transactions through 'self-hosted wallets' are a crucial component of the digital asset ecosystem as they eliminate third-party risks," the letter stated. "The inclusion of certain digital asset wallet providers that do not themselves maintain ongoing relationships with consumers essentially introduces regulatory risk... We urge CFPB to refrain from using such a broad definition."

On January 8, the Crypto Innovation Council expressed "deep concern" about the proposed rule's impact on the crypto space, warning that it could "amplify regulatory fragmentation." The advocacy group suggested that CFPB should not extend its authority into the digital asset space, hinting that Congress should provide the appropriate regulatory framework.

McHenry, who leads the House Financial Services Committee, announced in December 2023 that he would not seek re-election for the term starting in January 2025. According to numerous polls, control of the US House of Representatives may come down to a coin toss in 2024 as all 435 seats will be up for grabs.