The Consumer Financial Protection Bureau (CFPB) of the U.S. is invoking a largely dormant legal provision to increase its power over crypto and fintech firms.
The CFPB announced it would use the rule against “nonbank companies posing risks to consumers.”
The rule, targeted at the crypto market, will help protect consumers and “level the playing field between banks and nonbanks.” It falls under the Dodd-Frank Act and will essentially allow the authority to review crypto firms and the risks that they pose.
Risk is key, as the CFPB can go after any crypto firm that it believes threatens consumer protection, just as it would a bank.
CFPB Director Rohit Chopra said the idea is to nip any risks in the bud. “Given the rapid growth of consumer offerings by nonbanks, the CFPB is now utilizing a dormant authority to hold nonbanks to the same standards that banks are held to. This authority gives us critical agility to move as quickly as the market, allowing us to conduct examinations of financial companies posing risks to consumers and stop harm before it spreads,” he said.
Consumer bureau asks for input from public
The CFPB has also asked for public feedback on the rule. It wants this guidance and offers potentially affected entities a chance to respond.
The decision expands the number of regulatory bodies in the U.S. that are working on crypto regulation. Officials have talked about the need for various agencies to work together to regulate the crypto market, and this process has been coming together in recent months.
Among the highest priorities for the U.S. government are stablecoins, which are also a source of concern for several other countries. The Federal Reserve Chair believes that they can co-exist with a central bank digital currency, but there is no doubt that authorities will impose some control over them.
The crypto market faces some fallout, whether good or bad, from the changes coming out of the U.S., with DeFi shaping up to be one of the biggest topics for consideration.
The IMF says that DeFi poses risks to financial markets, so the popular space can expect to see some regulation soon.