Consensys Letter Challenges CFPB's Rule on Regulating Unhosted Wallets

Ethereum software firm Consensys has pushed back against a proposed rule from the Consumer Financial Protection Bureau (CFPB) that could drastically change how unhosted blockchain wallets such as MetaMask are regulated. (Disclosure: Consensys is one of 22 investors in Decrypt.)

Introduced in January, the proposed interpretive rule sought 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.

In a short comment sent to Scott Bessent, Acting Director of the CFPB, Consensys called the rule a “radical departure from current law” and 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 said about the rule, which was proposed just before Joe Biden’s departure from office.

Describing the proposed rule as “industry-redefining,” Bill Hughes, Senior Counsel & Director of Global Regulatory Matters at Consensys, warned that its implementation 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.

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

Consensys fully expects the CFPB, now under the leadership of President Trump’s treasury pick Scott Bessent, to either withdraw this interpretive rule from its agenda or revise it to exclude the crypto sector.

“When that happens, we will applaud the agency for doing the right thing both legally and policy-wise,” Hughes tweeted.

Trump’s crypto agenda

Since taking office, Trump has repeatedly 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.

The CFPB, an agency proposed in 2007 by crypto-skeptic Senator Elizabeth Warren while she was a Harvard law school professor, has been closely associated with stricter consumer protections.

While former CFPB Director Rohit Chopra defended the controversial rule as a measure to protect consumers, many—including Hughes—saw it as an overreach.

Consensys has also directed the CFPB to a comment letter from the Blockchain Association, of which it is a member, and the DeFi Education Fund, with Hughes emphasizing that the platform fully endorses the upcoming letter which addresses the concerns with the rule.