Consensys Opposes CFPB Plan to Regulate Unhosted Wallets

Consensys submitted a short comment in response to the Consumer Financial Protection Bureau's proposed interpretive rule that unhosted wallets like MetaMask are actually regulated under the Electronic Funds Transfer Act (EFTA) and CFPB's Regulation E. It is our view that this proposal is clearly improper as a matter of substantive law, public policy, and administrative procedure.

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On March 20 Consensys wrote to the Consumer Financial Protection Bureau, now under the leadership of Acting Director Scott Bessent, to respond to the proposed rule that unhosted wallets like MetaMask should be regulated under EFTA and Regulation E.

In short, unhosted wallets and their developers are nothing like financial institutions that maintain consumer accounts, to which the EFTA is intended to apply. Bending ourselves into a pretzel to apply the EFTA to unhosted wallets is bad policy because it would put wallets in an impossible bind. They simply cannot come into compliance, and suggesting that they could only belies a complete lack of understanding of blockchain accounts and how wallets are used to access them and transact.

This industry-redefining rule would wreak unparalleled damage on blockchain software developers in the US who are hard at work making the US the global leader in crypto. All that aside, proceeding with all this through an interpretive rule essentially sets fire to the Administrative Procedure Act. And as you might be able to guess, dear lay reader, courts frown on that.

We fully expect the CFPB to either remove this interpretive rule from the regulatory agenda or amend it so as to avoid the crypto question altogether. When that happens, we will applaud the agency for doing the right thing both legally and policy-wise.

Read Consensys' comment to the Consumer Financial Protection Bureau in full here.