Regulation,  United States

Rohit Chopra Backs SEC’s ‘Regulation By Enforcement’ Regime

Agency head wants to bully state AG’s into enforcing CFPB rules

Rohit Chopra, head of the Consumer Financial Protection Bureau, signaled in an interview with American Banker yesterday that his agency may move on an enforcement action relating to cryptocurrencies at the same time that the Securities Exchange Commission is also looking at regulatory action concerning the sector.

American Banker’s Kate Berry asked Chopra how concerned he was about “crypto,” stating that “You have complaints from consumers who say their money has been stolen.”

Chopra replied, “Well, it’s interesting. Right now, cryptocurrencies are really primarily in the speculative trading markets. There is a question though about what happens when some of that is riding the rails of the Big Tech firms or have a place in everyone’s wallet and then all of a sudden it could become a consumer issue. Our complaint database — it’s like a huge surge. It’s also at the SEC.”

That response and potential move may worry some cryptocurrency investors and others doing business in the broader space. While some parts of the sector have complained that SEC has been slow to put in place regulation that would provide certainty to investors and keep money from flowing to crypto markets in other countries that provide more regulatory certainty, CFPB is developing a reputation for aggressive regulatory and enforcement action that some in the broader financial services space consider stifling and anti-innovation.

Chopra has recently been lambasted by Sen. Pat Toomey, R-Pa., ranking member of the Senate Banking Committee, for leading “a lawless and unaccountable agency” that is “more out of control than ever before.”

The US Chamber of Commerce has called for CFPB’s powers to be reined in.

Chopra has recently moved to eliminate CFPB’s “fintech sandbox.” He has also moved against so-called “junk fees,” to co-opt state attorneys general into enforcing CFPB’s rules, to push other federal regulators including the FTC, Federal Reserve and Justice Department into copycatting CFPB’s approach to enforcement, and made competition and antitrust a focus for the Bureau.

No Republicans voted to confirm Chopra to his current position.

A push to regulate crypto heavily through CFPB enforcement action could result in real blowback from an incoming Republican majority—and existing membership.

While Sen. Toomey is retiring this year, he remains in his position until January and notably has invested in crypto himself.

In addition, Republicans are likely to retake House and Senate majorities.

Several members of the Senate Banking Committee specifically have shown themselves to be staunch defenders of crypto, notably Sen. Cynthia Lummis—the first Member of Congress to invest in it.

Of note, as of late April 2022, data showed that only Republican members had directly invested in cryptocurrencies.

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Liz Mair is President of Mair Strategies LLC, a boutique strategic communications firm.