House Panel Chairman Urges CFPB to Rethink Strict Crypto Oversight Proposal
Julia Smith
Last updated:
March 13, 2024 19:12 EDT
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2 min read
French Hill (R-AR), Chairman of the House Financial Services Subcommittee on Digital Assets, Financial Technology, and Inclusion, strongly criticized the Consumer Financial Protection Bureau (CFPB) on Wednesday for its recent proposal on federal oversight of digital asset payment systems. Hill urged the independent government agency to start over and revise their proposal.
Republicans Express Concerns Over CFPB’s Oversight Rule
Hill stated, “There is no doubt that this proposal will stifle innovation in the payments industry and limit consumer choice of payment methods, which will ultimately reduce competition.”
Republican members of the subcommittee raised concerns that the CFPB’s new rule represents an overreach and could potentially lead to surveillance.
Hill continued, “The CFPB needs to go back to the drawing board, prioritize consumer protection, and avoid hindering innovation or expanding their power and authority.”
CFPB Aims to Address Regulatory Arbitrage
Initially introduced by the CFPB in November 2023, the proposed rule would grant the agency the authority to oversee larger nonbank companies that offer services like digital wallets and payment apps, including peer-to-peer and electronic fund transfer payment services.
Consumer Financial Protection Bureau Director Rohit Chopra explained, “Payment systems are crucial infrastructure for our economy. In the past, these activities were mostly carried out by supervised banks. This rule would address regulatory arbitrage by ensuring that large technology firms and other nonbank payment companies are subject to appropriate oversight.”
According to Data Horizon Research, the digital payment sector is projected to be valued at $505 billion by 2032, with an annual growth rate of 19.7%.
Democrats Argue for Consumer Protection
During the hearing, Democratic members pushed back, asserting that payment platforms like Venmo and PayPal should adhere to consumer protection laws, thereby enhancing safety in the sector.
Congressman Stephen Lynch (D-MA) stated, “The CFPB is not transitioning into a technology regulator, but rather, technology companies are becoming financial institutions.”
Representative Maxine Waters (D-CA) claimed that the rule would not restrict competition and payments but rather increase competition by preventing large companies from unfairly dominating smaller ones through their size and data advantage.
CFPB Under Pressure to Clarify Stance on Cryptocurrencies
The hearing took place amidst ongoing discussions about the boundary between traditional finance and digital assets, particularly in light of the banking crisis in 2023 that resulted in the collapse of several crypto-friendly banks.
Despite congressional deliberations on the CFPB’s proposed rule concerning cryptocurrencies, the agency has not provided clarity on the future regulations for digital asset payment systems.
“The CFPB’s timeline for finalizing the proposal and addressing the raised concerns remains uncertain,” as stated in the committee memorandum.
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