US Consumer Protection Agency Intends to Supervise Crypto Wallets

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• The United StatesConsumer Financial Protection Bureau has disclosed that it intends to supervise crypto wallets
• The agency believes the operation of non-bank digital wallets “blur the traditional lines”
• The move is part of the watchdog’s mission to extend its reach beyond depository institutions

The United States consumer protection agency, Consumer Financial Protection Bureau (CFPB), has disclosed plans to extend its reach beyond depository firms to include crypto wallets. The agency believes that crypto and other non-bank wallets operate outside the traditional consumer protection laws putting their users at a higher risk. CFPB’s move follows that of financial and law enforcement agencies around the world to interact with the blockchain world, an indication that they are convinced crypto and web3 technologies are gaining mainstream usage.

Crypto Wallet Developers Need Oversight

Announcing its intentions, the agency said that its extension of duties will encompass other consumer-related areas such as automobile financing and debt collection. However, the supervision will target entities with over five million transactions per year.

Many payment platforms embed their technology in mobile devices that gives them the power to surveil and censor. The CFPB is proposing enhanced oversight to ensure that they are following the law when it comes to privacy, fraud, and more.

— Rohit Chopra (@chopracfpb) November 7, 2023

According to the CFPB, companies in this range often ignore the lines between “banking and payments [putting] consumers at risk.” The agency’s director Rohit Chopra said that the proposed rule will ensure “technology firms […] are subjected to appropriate oversight.”

CFPB believes that crypto wallets have a usage similar to that of debit and credit cards but they operate outside consumer protection rules governing credit and debit card users.

In order to put crypto wallet usage in the same basket as debit and credit cards, the bureau suggests expanding the meaning of ‘funds’ to include cryptocurrencies. The agency would however concentrate on transactions involving crypto and fiat pairs.

Securities and Commodities Regulators also Involved

CFPB’s proposed rule comes a few days after Abu Dhabi released a regulatory framework to govern operations in the blockchain world and two months after the New York financial regulator proposed new guidelines for crypto coin listing and delisting.

The United States securities and commodities watchdogs are also actively getting involved in the crypto world, an indication of increased crypto adoption.

With the consumer protection agency indicating plans to supervise crypto wallets, it’s to be seen whether wallet developers will be willing to share users’ usage data.