Consumer watchdog’s proposed digital payments rule creates ‘regulatory uncertainty’: McHenry

The proposed rule could “undermine the digital asset industry’s functionality” when it comes to payments, lawmakers warn


House Financial Services Committee Chair Patrick McHenry, R-NC, Rep. Mike Flood, R-NE, and Rep. French Hill, R-AR want the Consumer Financial Protection Bureau to reopen the comment period on a proposed rule.

The lawmakers are concerned that the rule, dubbed “Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications” — which seeks to demarcate the market for consumer payment applications — fails to understand potential harm to consumers. 

“As written, the proposed rule does not adequately justify the need to substantially expand the Bureau’s regulatory scope into the payments industry,” the letter said.

Specifically, the rule as it stands has an unclear impact on digital assets, according to the lawmakers. 

“On one hand, the proposed rule explicitly states that fiat-to-crypto and crypto-to-crypto transactions conducted on an exchange would not be covered. However, it remains unclear if this exclusion would exempt digital asset exchanges entirely, or only in instances where they offer services limited to the conversion of fiat-to-crypto and crypto-to-crypto transactions,” it said.

Read more: Treasury’s Wally Adeyemo: My agency needs more power to regulate crypto 

The letter continued, “the Bureau’s approach creates more regulatory uncertainty that could undermine the digital asset industry’s functionality with respect to digital asset transactions.”

Due to the lack of clarity, the lawmakers are asking the CFPB to reopen the comment period and extend it for 60 days. 

The rule on digital consumer payment applications was first proposed back in November. 

Hill, McHenry and Flood believe that the rule as it stands “does not adequately justify the need to substantially expand the Bureau’s regulatory scope into the payments industry.” They believe it would also introduce “more regulatory uncertainty into the payment industry,” in particular with digital assets. 

Read more: The US Supreme Court could reshape the SEC’s powers — and how the agency approaches crypto

Regulation in crypto is a highly discussed issue, especially concerning the Securities and Exchange Commission’s approach to crypto. The SEC has been accused of regulation through enforcement following lawsuits against Binance and Coinbase last year. In 2023, the SEC brought 46 crypto-related suits.

Other agencies, such as the Internal Revenue Service, are mulling rules on crypto reporting requirements.

Additionally, lawmakers in DC are currently considering a few crypto-related bills.

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