Lawmakers debated whether new rules proposed by the Consumer Financial Protection Bureau that could subject payment apps like PayPal and Venmo to scrutiny should loop in cryptocurrencies.
At a Congressional hearing on Wednesday, some House Republicans accused the CFPB of leading Congress' efforts on virtual currency legislation and asked witnesses whether the CFPB has the authority to oversee the cryptocurrency industry. .
At a House Financial Services Subcommittee hearing focused on digital assets, Rep. Mike Flood (R-Nebraska) said, “The CFPB has taken over this area with the stroke of a pen and with little legal basis.'' I would be rather discouraged if I could simply claim authority.” and financial technology.
Meanwhile, some House Democrats argue that CFPB oversight of cryptocurrencies is necessary given their volatile nature. Rep. Stephen Lynch, D-Mass., said many of the cryptocurrencies launched in the past few years have since “disappeared,” causing people to lose their investments.
“There's a tremendous amount of risk and volatility to that, but some say there's no risk-based reason for the CFPB to go ahead with this,” Lynch said.
At the center of the debate is a proposed rule called the Definition of Large Participant in the General Purpose Digital Consumer Payment Application Market, which was first proposed in November. The rule gives the CFPB the power to supervise “large nonbank companies” that provide services such as digital wallets and payment apps, and allows nonbank financial companies that handle more than 5 million transactions a year to compete with large banks and credit unions. It is mandatory to follow the same rules. the CFPB stated.
CFPB on page 62 rule You mention cryptography several times. Jack Solowy, a financial technology policy analyst at the Cato Institute, a liberal think tank, who testified at the hearing, said the rule “improperly asserts jurisdiction over cryptocurrencies.” Consumer payment transactions involve transferring funds for personal use, and Solowy said this could loop into cryptocurrencies. In his prepared testimony, Solowy pointed out that this rule also extends to self-hosted wallets.
House Financial Services Committee Chairman Patrick McHenry (R-Calif.) and Representative French Hill (R-Arkansas) criticized He said the proposed rule's impact on digital assets is unclear. Many Republicans have historically not been fans of the CFPB, which was created in 2011 under the Dodd-Frank Act and is tasked with overseeing financial services provided to consumers.
Rep. Warren Davidson (R-Ohio) said crypto companies are seeking clarity from regulators, including the Securities and Exchange Commission. Those companies have a lot of “endless” information, but no answers, Davidson added.
“In some ways, it's like Hotel California,” Davidson said. “You can never check out and you can never leave.”
Preventing the following FTX
In his opening remarks, Christopher Odinet, a law professor at the University of Iowa, said cryptocurrencies should be included in some form of regulation and subject to CFPB oversight. One reason for this is that their operations may be opaque.
“For example, consider the high-profile collapse of major cryptocurrency exchange FTX,” Odinet said. “I think it reveals something that we previously knew very little about the nature of these transactions and how consumer assets are handled.”
FTX, once led by former CEO Sam Bankman Fried, filed for bankruptcy at the end of 2022. Mr. Bankman Freed was discovered. guilty A year later, it defrauded FTX customers, lenders, and investors.
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