US CFPB finalizes its rule for large nonbank firms offering digital payments, but excludes crypto

The U.S. Consumer Financial Protection Bureau finalized a rule that would give the agency the ability to supervise "large nonbank companies" and notably left out crypto.

The agency, tasked with overseeing consumer financial markets, wrapped up its rule called the "Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications," on Thursday.

The rule was first proposed last November and would give the CFPB the ability to supervise "larger nonbank companies" that have services like digital wallets and payment apps. The rule would require nonbank financial companies handling more than 50 million transactions a year to follow the same rules as large banks and credit unions, the CFPB said.

Notably, the CFPB said on Thursday it narrowed its scope to "only transactions conducted in U.S. dollars."

"…the Final Rule limits the definition of 'annual covered consumer payment transaction volume' to transactions denominated in U.S. dollars," the CFPB said in its 259-page rule. "With this clarification … the larger-participant test in this Final Rule excludes transfers of digital assets, including crypto-assets such as Bitcoin and stablecoins."

Some in the crypto industry and Republican lawmakers aired concerns that the rule would have an unclear impact on digital assets. The DeFi Education Fund said the CFPB's definition of "larger participants" was too vague, in a letter filed in January.

"As written, the definitions make it difficult to determine which entities will be included in the overall market and even more difficult to apply the 'larger participant' test in an intelligible way," the group said in the letter.

Lizandro Pieper, policy associate at the DeFi Education Fund, said Congress should be the "primary force" in adopting rules for digital assets, not regulatory agencies.

"We are pleased that the CFPB considered our concerns and excluded digital asset transactions from its finalized rule today," Pieper said in an emailed statement to The Block. "The rule will now only consider US dollar transactions in its larger participant threshold."

Other crypto groups also pushed back against the CFPB's initial proposal including the Crypto Council for Innovation and Coin Center.