Last year the Consumer Financial Protection Bureau (CFPB) proposed a rule to supervise non banks that provide payment services. That will include wallets and digital asset service providers. Yesterday, three senior Republicans on the House Financial Servies Committee sent a letter on the topic to the CFPB. They want it to reconsider the rule and reopen the comment period, which closed on January 8.
The regulators argue that the CFPB proposal fails to assess compliance costs and impact on competition, which could hurt consumers. When the CFPB first announced the proposed rule, it explicitly mentioned BigTech and “other large technology firms, digital payment apps and wallets” as the target. The detailed statement specified there are 17 relevant large entities. It proposed a threshold of five million annual transactions to be considered as large.
Consumer or household payments and related credit are the main functionality in scope. Hence, the rule includes digital wallets, payment, and fund transfer apps. It also covers third party service providers.
Digital assets used for consumer payments are explicitly in scope. The CFPB wrote, “The term funds in the CFPA (Consumer Financial Protection Act) is not limited to fiat currency or legal tender, and includes digital assets that have monetary value and are readily useable for financial purposes, including as a medium of exchange. Crypto-assets, sometimes referred to as virtual currency, are one such type of digital asset.”
One of the concerns raised by the regulators relates to digital assets. “The Bureau’s approach creates more regulatory uncertainty that could undermine the digital asset industry’s functionality with respect to digital asset transactions,” they wrote.
EU draft identity & wallet legislation
Meanwhile, on the other side of the pond, there’s a storm brewing over digital wallets. The yet-to-be-finalized European Union digital identity legislation for the eID 2.0 is alarming cybersecurity specialists. They believe the law, as currently drafted, would allow a single EU state to snoop on the digital wallets of all EU citizens.