The Consumer Financial Protection Bureau (CFPB), a U.S. financial regulatory agency, has finalized the 'Larger Participant' criteria for digital payment platforms and excluded the transfer of Cryptoassets from this regulation.
Under the final rule, digital wallets like Apple Pay and centralized 'peer-to-peer' payment services will still be subject to the regulation, but only for transactions denominated in U.S. dollars. The government agency wrote:
"The Final Rule limits the definition of 'annual consumer payment transaction volume' to only cover transactions denominated in U.S. dollars. With this clarification, along with the corresponding amendment to paragraph (b)(3)(i), the Larger Participant test in this Final Rule will exclude digital asset transfers — including Cryptoassets like Bitcoin and Stablecoin."
Industry players like the research-driven investment firm Paradigm and pro-Cryptoasset non-profit groups successfully pushed back against CFPB's initial proposal, which had included digital asset transactions.
Cover page of the CFPB's final rule. Source: CFPB
CFPB focuses on digital payment services
CFPB started paying attention to digital payment services like Apple Pay, Google Pay, and 'peer-to-peer' platforms like Venmo in September 2023. At the time, the agency raised concerns about the potential monopolistic power of big tech companies crowding out smaller players in this space.
At the time, CFPB Director Rohit Chopra also cited the monetization of consumer data by these companies as another concern.
After the initial announcement, CFPB had proposed to supervise cryptocurrency wallet providers. However, this expansion of oversight faced opposition from the Cryptoasset industry and lawmakers.
U.S. lawmakers wrote to CFPB in January 2024 to oppose this regulation due to its potential impact on Cryptoassets. "Peer-to-peer transactions through 'self-custodial wallets' are an essential component of the digital asset ecosystem, as they eliminate third-party risk," the lawmakers wrote.
Despite the opposition, CFPB appears to have doubled down in April 2024 by targeting blockchain-based video games, due to the potential for in-game Asset Tokens to be traded outside the game ecosystem on electronic exchanges.
