The Consumer Financial Protection Bureau (CFPB) is expected to reduce its involvement in cryptocurrency regulations due to budget cuts and wider changes in surveillance of other institutions. Ethan Ostroff, a partner at the law firm at Troutman Pepper Locke, believes the CFPB will step backwards to ensure that other federal agencies, such as the Securities and Exchange Commission (SEC), and state-level regulators take on more responsibility.
In February 2025, Russell Vault became head of the CFPB and quickly introduced major funding cuts to streamline the institution. The move is part of the Trump administration, which focuses on reducing government spending and restructuring regulatory bodies. The CFPB transition from cryptographic regulations occurs as the SEC and state regulators are expected to play a greater role.
Under the Consumer Financial Protection Act, state agencies such as the New York Department of Financial Services (NYDFS) and the California Department of Financial Innovation (DFPI) are positioned to assume some of the regulatory responsibilities the CFPB no longer oversees. Despite this diminished role, the CFPB retains regulators on cryptography for legal obligations. These obligations cannot be changed without approval from the council. This means that institutions maintain control over several aspects of cryptocurrency regulations.
Massachusetts Sen. Elizabeth Warren, who helped discover the CFPB in 2007, criticizes the current administration for dismantling consumer protection measures. She described the move as an attempt to provide private financial institutions with more control over the system. However, Warren acknowledged that the CFPB cannot be completely dismantled with executive action alone, and such changes require Congressional approval.
The reduction in the CFPB’s regulatory role represents a major shift in how cryptocurrencies are regulated in the United States. With the SEC and state agencies now at center stage, the crypto industry could face a more fragmented regulatory environment. It could play a more active role in industry regulation, but other states may not be involved much.
As the regulatory environment evolves, the future of cryptocurrency surveillance remains uncertain. Industry stakeholders will watch carefully how these changes will affect market stability, investor protection and innovation in the sector already known for their volatility. The reduced role of the CFPB indicates a greater change in the federal regulatory framework for cryptocurrency. This could have a lasting impact on the industry.