US lawmakers are pushing back on the proposed CFPB rule citing the potential impact on crypto

Leaders of the US House Financial Services Committee and the Subcommittee on Digital Assets, Financial Technology and Inclusion have asked the Consumer Financial Protection Bureau (CFPB) for a lengthy comment on the proposed rule, saying its impact on the digital asset space is “unclear” if implemented.

In a Jan. 30 letter to CFPB Director Rohit Chopra, Reps. Patrick McHenry, Mike Flood and French Hill questioned how the November 2023 proposal would “apply to certain entities in the digital asset ecosystem.” The CFPB proposed legislation to extend its regulatory powers to depository institutions, including digital assets in its definition of “funds” and would allow it to target wallets.

The three lawmakers said the lack of transparency for affected crypto exchanges could discourage companies from allowing peer-to-peer transactions through wallets hosted on the platforms. They asked the CFPB to open the proposal to public comments for an additional 60 days, considering adoption and feedback on crypto.

#NEWS: Chairman @PatrickMcHenry, subcommittee chairman @RepFrenchHill and @USRepMikeFlood sent a letter to @CFPB Director Rohit Chopra asking the agency to revisit the proposed rule on large participant digital utility bills.

⬇️ Read more pic.twitter.com/W2kYVmQEM4

— Financial Services GOP (@FinancialCmte) January 30, 2024

The letter says “self-hosted wallets” are an integral part of the digital asset ecosystem for peer-to-peer transactions, as they eliminate third-party risk. “Holding certain digital asset wallet providers that do not have an ongoing relationship with users primarily poses a regulatory risk. […] We urge the CFPB to refrain from adopting such a broad interpretation.

RELATED: Digital Assets Subcommittee Chair Hopes to See Crypto Accounts ‘Fruiting Up' by 2024

The Crypto Council told Innovation on Jan. 8 that it has “deep concerns” about the law's impact on the crypto space, saying it could “increase regulatory fragmentation.” The advocacy group recommended that the CFPB not extend its authority in the digital asset space, hinting that it should wait for Congress to provide an appropriate regulatory framework.

McHenry, who chairs the House Financial Services Committee, announced in December 2023 that he would not seek re-election to a new term beginning in January 2025. Control of the US House of Representatives could come down to pennies in 2024, according to multiple polls. As all 435 seats are up for election.

Magazine: Legislators' fear and skepticism fuel proposed crypto regulations in the US.