CFPB Director Rohit Chopra is launching a major regulatory crackdown at the nexus of finance and tech. Under his proposal, Washington would start policing Apple Pay, Google Pay, Cash App and Venmo like the largest banks. The move is a big shift for tech giants that have been operating under relatively less scrutiny from federal banking regulators, even as their services have come to dominate how millions of Americans pay for stuff every day. The CFPB wants its examiners to regularly supervise 17 providers of payment apps and digital wallets that handle $1.7 trillion in consumer transactions per year. It’s the latest front in a decades-old Washington debate about the blurring of banking and commerce. On the cusp of the iPhone era, Wal-Mart faced fierce opposition when it sought a banking charter, leading it to abandon the plan. Now policymakers are focused on the companies that control the device serving up this very newsletter — and it’s unlikely they’re going anywhere. “These activities used to be conducted almost exclusively by supervised banks,” Chopra said in a statement."Today's rule would crack down on one avenue for regulatory arbitrage by ensuring large technology firms and other nonbank payments companies are subjected to appropriate oversight." The fight is poised to trigger a battle between the lobbying arms of the banking and tech industries, after years of simmering tensions. Warning shots were quickly fired Tuesday. Banks have long agitated for more scrutiny of tech firms engaging in finance in the name of securing a level regulatory playing field. The CFPB is using similar language to justify its new foray into Big Tech. Banks large and small are backing the move. They're sounding in sync with Sen. Elizabeth Warren, who called the CFPB rule a “common sense and much-needed step to protect consumers using payment apps.” “If it walks like a bank and talks like a bank, regulate it like a bank,” said Bank Policy Institute Senior Vice President Paige Pidano Paridon. The Independent Community Bankers of America is urging regulators to go even further, arguing there remains “significant work to be done” on digital assets. Advocates for tech giants say the CFPB is handing a gift to banks that have failed to keep up with the needs of customers. The Chamber of Progress, which is backed by Apple, Google and other major tech firms, said the proposal “is more about giving Wall Street a foot up than protecting consumers.” House Financial Services Chair Patrick McHenry, a major fintech proponent, also blasted the CFPB. “Consistent with the bureau’s track record, this proposed rule will only entrench the status quo by impeding the adoption and development of innovative products and services,” he said. It’s a rare moment of unity between the CFPB and the banks, but it may do little to offset the bigger threats traditional lenders face from fintechs. “They say that the enemy of my enemy is my friend. That is true in the most limited sense with this release,” Isaac Boltansky, director of policy research at BTIG, told MM. “The bureau’s release is a win for banks, but this is a modest victory as it is just a small step toward leveling the playing field and does nothing to address broader market dynamics.” Happy Wednesday — What do you think of the CFPB’s plan? What’s the impact? MM wants to hear from you: zwarmbrodt@politico.com.
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