A recent proposal that is currently in talks could allow the supervision of nonbank payment providers by the CFPB. This would allow oversight of various crypto transactions, including ones between people. The Protection Bureau has set its sights on digital currencies as it sets out to amend similar rules to traditional financial institutions.
The crypto space is a decentralized realm that is free from such constraints based on its anonymous nature. This has favored their adoption by major institutional players as well as retail investors, and as such, it could have other implications for the cryptocurrency community.
CFPB proposal on crypto payments oversight and regulation
The proposal announced on Tuesday seeks to let the United States Consumer Financial Protection Bureau (CFPB) oversee major nonbank payment providers and guard them in complaints with rules set in traditional finance by which central institutions abide by.
This would also include various cryptocurrency platforms as monitoring of transactions would be employed. The proposal on November 7 would let the CFPB supervise major parties involved in “general-use digital consumer payment applications” if adopted.
The document details this and includes the transfer of funds or wallet providers and the assessment used by individuals but only for commercial purposes. The document confirmed that transactions of digital currencies would be included based on how the regulatory authority defines “funds.”
The proposal stated, “The CFPB’s ability to monitor for emerging risks is critical as new product offerings blur the traditional lines of banking and commerce.”The proposal also stated:
The Proposed Rule would establish the CFPB’s supervisory authority over certain nonbank covered persons participating in a market for “general-use digital consumer payment applications.
CFPB Proposal
In establishing the CFPB’s supervisory authority over such persons, the Proposed Rule would not impose new substantive consumer protection requirements or alter the scope of the CFPB’s other authorities.”
Details of the proposal
The filing also lists different components in its definition of customer payment applications. This includes the location of the customer (the US) and confirmation of payment processing. It also stated that such transactions should only cover household, family, or personal purposes. The Tuesday proposal stated:
“The proposed market would include providers of funds transfer and wallet functionalities through digital applications for consumers’ general use in making payments to other persons for personal, family, or household purposes. Examples include many consumer financial products and services that are commonly described as “digital wallets,” “payment apps,” “funds transfer apps,” “person-to-person payment apps,” “P2P apps,” and the like.
CFPB Proposal
Moreover, the rule focuses on large tech companies that offer financial services, but the name listing of such firms hasn’t been noted in the proposal. Also, the proposal stated:
The CFPB is authorized to supervise nonbank covered persons subject to CFPA section 1024 for purposes of (1) assessing compliance with Federal consumer financial law; (2) obtaining information about such persons’ activities and compliance systems or procedures; and (3) detecting and assessing risks to consumers and consumer financial markets.
Regulation Proposal
However, companies that allow cross-border digital payments, like Venom (PayPal’s subsidiary) or Cash App, owned by Block, could be examples of firms that will have to follow the CFPB rules if the proposal is approved.
The document also stated that major digital currencies such as Bitcoin qualify as assets that will be overseen by the CFPB. Notably, the proposed rule would not cover individuals purchasing or selling digital currencies or exchanging them for other cryptos in exchange firms.
Additionally, the CFPB is publicly requesting feedback on various parts of the proposal and would like commentary on the matter via email or their online website.
