Consensys Letter Challenges CFPB’s Rule on Regulating Unhosted Wallets

Here is the rewritten content in well-organized HTML format with all tags properly closed:

Ethereum Firm Consensys Pushes Back Against Proposed CFPB Rule on Unhosted Blockchain Wallets

Consensys, a leading Ethereum software firm, has expressed strong opposition to a proposed rule from the Consumer Financial Protection Bureau (CFPB) that could significantly alter the regulation of unhosted blockchain wallets, including MetaMask.

The proposed interpretive rule, introduced in January, aims to regulate unhosted wallets under the Electronic Funds Transfer Act (EFTA), holding developers accountable for fraudulent or unauthorized transactions and enforcing traditional financial institution regulations on decentralized wallets.

Consensys’ Concerns

In a letter to Scott Bessent, Acting Director of the CFPB, Consensys described the proposed rule as a “radical departure from current law” and warned that the regulatory regime would be detrimental to both “blockchain developers and users.”

“It is our view that this proposal is clearly improper as a matter of substantive law, public policy, and administrative procedure,” the letter stated.

Industry-Wide Impact

According to Bill Hughes, Senior Counsel & Director of Global Regulatory Matters at Consensys, the proposed rule would cause “unparalleled damage” to U.S.-based blockchain developers.

“Bending ourselves into a pretzel to apply the EFTA to unhosted wallets is bad policy because it would put wallets in an impossible bind,” he said.

Proper Legislative Procedure

Hughes also criticized the rule for bypassing proper legislative procedures, saying that implementing such changes through an interpretive rule violates the Administrative Procedure Act – a move he claimed courts would likely oppose.

Trump’s Crypto Agenda

Since taking office, President Trump has showcased his commitment to crypto with key moves, from unveiling plans for a Bitcoin reserve to creating a crypto task force with pro-crypto leaders.

The 47th U.S. President has vowed to make America the “undisputed Bitcoin superpower,” marking a departure from the previous administration’s regulatory stance on crypto.

CFPB’s Regulatory Stance

The CFPB, established in 2007 by crypto-skeptic Senator Elizabeth Warren, has been closely associated with stricter consumer protections.

Former CFPB Director Rohit Chopra defended the controversial rule as a measure to protect consumers, while many – including Hughes – saw it as an overreach.

Conclusion

Consensys has expressed its strong opposition to the proposed CFPB rule, warning that it would have severe consequences for the blockchain industry. The firm has called on the CFPB to revise the rule or withdraw it entirely.

FAQs

What is the proposed CFPB rule?

The proposed rule aims to regulate unhosted blockchain wallets under the Electronic Funds Transfer Act (EFTA), holding developers accountable for fraudulent or unauthorized transactions and enforcing traditional financial institution regulations on decentralized wallets.

Who is Consensys?

Consensys is a leading Ethereum software firm that has expressed strong opposition to the proposed CFPB rule.

What are the concerns with the proposed rule?

Consensys has raised concerns about the rule’s potential to cause “unparalleled damage” to U.S.-based blockchain developers, its bypassing of proper legislative procedures, and its potential to put wallets in an “impossible bind.”

What is the CFPB’s stance on crypto?

The CFPB, established in 2007 by crypto-skeptic Senator Elizabeth Warren, has been closely associated with stricter consumer protections. Under the current leadership, the CFPB has taken a more regulatory approach to crypto, with some seeing it as an overreach.

What is the significance of the proposed rule?

The proposed rule has significant implications for the blockchain industry, as it could alter the regulatory landscape for unhosted wallets and decentralized finance (DeFi) platforms. The outcome of the rule will depend on the CFPB’s decision to revise or withdraw it entirely.