Consensys Opposes CFPB’s Proposed Rule on Unhosted Wallets

Ethereum software firm Consensys has opposed a proposed rule from the Consumer Financial Protection Bureau (CFPB) that could significantly alter the regulation of unhosted blockchain wallets like MetaMask.

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

In a brief comment to Scott Bessent, Acting Director of the CFPB, Consensys labeled the rule a “radical departure from current law” and argued that it would harm both “blockchain developers and users.”

The company believes the proposal is improper regarding substantive law, public policy, and administrative procedure. Bill Hughes, Senior Counsel & Director of Global Regulatory Matters at Consensys, described the rule as “industry-redefining” and warned that its implementation would cause “unparalleled damage” to U.S.-based blockchain developers.

> Today, @Consensys submitted a comment regarding the CFPB’s proposed interpretive rule that unhosted wallets like @MetaMask should be regulated under the EFTA and CFPB’s Regulation E. We believe this proposal is… Link to tweet

Hughes criticized the rule for evading proper legislative procedures, claiming that such changes through an interpretive rule violate the Administrative Procedure Act, a move he suggests courts would likely oppose.

Consensys anticipates that the CFPB, now under Scott Bessent’s leadership, will either withdraw this interpretive rule or revise it to exclude the crypto sector. Hughes expressed that the agency would be commended for taking the right approach legally and policy-wise.

Trump’s Crypto Agenda

Since taking office, President Trump has demonstrated his commitment to crypto through various initiatives, including plans for a Bitcoin reserve and establishing a crypto task force with pro-crypto leaders. He has promised to make America the “undisputed Bitcoin superpower,” contrasting sharply with the previous administration’s regulatory stance on cryptocurrency.

The CFPB, proposed in 2007 by Senator Elizabeth Warren, has been closely linked with stricter consumer protections. While former CFPB Director Rohit Chopra defended the controversial rule as protective for consumers, dissenters like Hughes view it as an overreach.

Consensys has also pointed the CFPB to a comment letter from the Blockchain Association and the DeFi Education Fund, with Hughes stressing the company’s full endorsement of the upcoming letter addressing concerns about the proposed rule.