CFPB excludes crypto wallets from new digital payment rules

The Consumer Financial Protection Bureau (CFPB) has finalised its “Larger Participants” rule for digital payment platforms, excluding cryptocurrency transactions from the regulatory framework.

The decision, outlined in a 259-page report, focuses on digital wallets and peer-to-peer payment services, limiting oversight to transactions denominated in U.S. dollars.

"The Final Rule limits the definition of 'annual covered consumer payment transaction volume' to transactions denominated in U.S. dollars. With this clarification...the larger-participant test in this Final Rule excludes transfers of digital assets — including crypto-assets such as Bitcoin and stablecoins," the CFPB stated.

Initially, the agency considered including cryptocurrency transactions under the rule but faced significant opposition from industry stakeholders and lawmakers.

Groups such as investment firm Paradigm and pro-crypto nonprofits argued that applying the rule to digital assets would stifle innovation.

Lawmakers emphasised the importance of self-hosted wallets for reducing third-party risks, urging the CFPB to reconsider its approach.

The finalised rule maintains oversight over centralised payment services like Apple Pay, Google Pay, and Venmo, which the CFPB began focusing on in September 2023 due to concerns over potential monopolistic practices and data monetisation by Big Tech firms.

This decision follows a series of actions by the CFPB to expand its supervisory scope.

Earlier in 2024, the agency attempted to extend oversight to crypto wallets and blockchain-based gaming platforms, citing their ability to facilitate external trading of in-game tokens.

However, these efforts were met with industry pushback, leading to the exclusion of cryptocurrency transactions in the final draft.