The US Consumer Financial Protection Bureau (CFPB) has put forth a rule that would enable it to regulate major non-bank providers of digital wallets and applications.
The regulation is a component of the agency’s broader initiative, which has seen it expand its oversight to include consumer reporting, debt collection, student loan servicing, international money transfers, and vehicle financing.
The proposal would broaden the role that supervisors now have in depository institutions, such as credit unions and banks.
Businesses like PayPal, Apple, Amazon, Google, and Meta that process more than five million transactions annually would be subject to the regulation.
The CFPB’s director, Rohit Chopra, stated in a statement that the rule “would crack down on one avenue for regulatory arbitrage.”
The agency claims that although there are at least as many users of digital apps as there are of credit and debit cards, these applications do not yet come with guarantees of consumer rights, privacy, or deposit insurance.
Although it now has enforcement power over IT companies, the rule would increase the scope of its supervisory function. By stating that the definitions of “funds” should be expanded to include crypto assets following existing federal regulations, the proposed rule directly targets cryptocurrency wallets.
The regulation focuses on money transfers for retail transactions as well as the buying and selling of commodities and securities.
The law would primarily apply to the retail usage of cryptocurrencies; exchanges of one cryptocurrency for another and the buying or selling of cryptocurrencies using fiat money would be exempt.
“Big Tech and other companies operating in consumer finance markets blur the traditional lines that have separated banking and payments from commercial activities. The CFPB has found that this blurring can put consumers at risk.”
This rule proposal is the result of months of work by the CFPB. In June, it issued a warning, stating that a large number of mobile payment apps lack deposit insurance.
In a lecture last month, Chopra reiterated the criticisms he made in September about Big Tech’s influence on the American payment system.