The U.S. Consumer Financial Protection Bureau (CFPB) has put forth a proposal to institute regulations governing large non-bank digital wallet and app providers. This initiative is part of a broader endeavor by the agency to extend its regulatory purview to encompass consumer reporting, consumer debt collection, student loan servicing, international money transfers, and auto financing.
Under the proposed rule, the CFPB aims to expand its supervisory authority to encompass companies processing over 5 million transactions annually. Entities that fall under this new framework include major tech firms like PayPal, Apple, Amazon, Google, and Meta. The agency's rationale for these expanded regulations is that "Big Tech and other companies operating in consumer finance markets have blurred the traditional lines that separate banking and payments from commerce activities, which could potentially put consumers at risk."
Rohit Chopra, the Director of the CFPB, emphasized that the proposed rule is aimed at combatting regulatory arbitrage and mitigating risks in the financial sector. Notably, the rule targets digital wallets in the cryptocurrency space, proposing that the definition of "funds" should be expanded to encompass cryptoassets, in line with existing federal regulations. It mainly pertains to the retail use of cryptocurrencies and excludes cryptocurrency-to-fiat transactions and the exchange of one cryptocurrency for another.
The CFPB has been working on this proposed rule for several months. In June, it had cautioned that many mobile payment apps lacked deposit insurance. Director Chopra has been vocal in his criticism of Big Tech's role in the U.S. payments system, reiterating these concerns in recent speeches and emphasizing the need for stronger consumer protection measures.
