The Consumer Financial Protection Bureau (CFPB) is setting the stage for more active participation in the crypto industry. On April 25, the CFPB announced that it would apply a largely untapped Dodd-Frank provision developed in the bureau following the 2007–2008 financial crisis.
The rule gives the CFPB fairly broad powers to supervise “non-banks” engaged in consumer-facing financial services based on potential risk. The scope of this definition is any non-banking entity “whose activities the CFPB has reasonable grounds to identify as presenting risks to consumers. However, the authority of the CFPB does not specifically refer to any particular consumer financial product or service.”
In a statement, the CFPB indicated its interest in a wide range of such organizations involved in new financial technologies.
“Non-bank organizations do not have a charter for a bank, savings or credit union. Although many today work at the national level and call themselves “fintechs,” the message says.
In its procedural rule, the CFPB emphasized that it already has powers that it will invoke, meaning that it does not have to wait for the normal time limits required by the Administrative Procedure Law:
“The final rule is not necessary to establish the Bureau’s supervisory authority under 12 USC 5514(a)(1)(C). Rather, the final rule simply provides transparency and consistency about the procedures the Bureau intends to use in connection with its pre-existing oversight body under 12 USC.”
As a result, the rule will take effect in just 30 days. At the time of writing, the CFPB did not specify whether it had already begun conducting supervisory investigations against firms based on this rule.
While the release does not specifically mention the cryptocurrency, CFPB’s interest in the industry is growing despite everything, as is the interest in its participation in cryptocurrencies. In October, Senator Elizabeth Warren told Bloomberg that the CFPB should crack down on crypto based on existing statutory powers.
In January, the bureau hired Alexis Goldstein of the antitrust Open Market Institute to lead the digital asset response. Goldstein has spent most of 2021 participating in Congressional hearings on cryptocurrencies, in which she has consistently criticized the industry. Recently, she often compared cryptocurrencies to Wall Street in the run-up to 2007.
CFPB director Rohit Chopra also appeared before the Senate Banking Committee today.
Over the past year, the bureau has received more than 12,000 cryptocurrency-related complaints, according to the CFPB. Earlier this year, the CFPB launched an investigation into the operations of PayPal’s Venmo payment system.