The new regulation could change how crypto wallets operate
The Biden administration, in its final days, put forward a controversial proposal targeting cryptocurrency wallet providers like MetaMask and Phantom. The Consumer Financial Protection Bureau (CFPB) proposed that wallet developers could be held accountable for fraudulent transactions or errors occurring on the blockchain.
Details about the new regulation
The CFPB announced a new interpretive rule, considering digital wallet providers as financial institutions offering electronic money transfer services.
If passed, this regulation would allow the agency to hold wallet providers accountable for unauthorized or erroneous transactions.
According to Rohhit Chopra, the CFPB director and longtime ally of Senator Elizabeth Warren, the goal is to ensure that crypto wallet users do not face the risk of fraud or unintended errors.
Strong backlash from the crypto community
This proposal immediately received strong opposition from industry leaders:
Bill Hughes, a senior advisor at Consensys, mocked that this is no different from holding crypto wallets responsible if users are scammed for illogical reasons.
Joey Krug, a partner at Founders Fund, compared the regulation to making hammer manufacturers responsible if hammers are misused.
Many in the industry also criticized this regulation as a last-ditch effort to rein in cryptocurrency from those associated with Elizabeth Warren, who is seen as a 'frenemy' of the crypto community.
The dim prospects of the regulation under the new administration
Despite the controversy, the likelihood of this regulation being enforced seems very low:
The U.S. Supreme Court has ruled that the President has the authority to remove the CFPB director without cause. This could lead to the early end of Rohhit Chopra's tenure, who was appointed in 2020.
The incoming administration of President Donald Trump, with a pro-cryptocurrency stance, is predicted to quickly reverse this proposal.
Conclusion
The CFPB's proposal is an effort to control crypto wallets and protect users from on-chain risks. However, with the impending change in administration, the likelihood of this regulation being enforced is very low. Nevertheless, this move is still a signal of the intense policy debates related to the cryptocurrency industry in the future.