CFPB Likely To Reduce Crypto Oversight as Trump Administration Cuts Funding and Shifts Regulatory Focus

The Consumer Financial Protection Bureau (CFPB) is expected to reduce its involvement in cryptocurrency regulation due to budget cuts and a broader shift in oversight to other agencies. Ethan Ostroff, a partner at Troutman Pepper Locke law firm, believes the CFPB will step back as other federal agencies, such as the Securities and Exchange Commission (SEC), and state-level regulators take on more responsibilities.

In February 2025, Russell Vought became the head of the CFPB and quickly introduced major funding cuts to streamline the agency. This move is part of the Trump administration’s focus on cutting government spending and restructuring regulatory bodies. The CFPB's shift away from crypto regulation comes as the SEC and state regulators are expected to play a larger role.

Under the Consumer Financial Protection Act, state agencies like the New York Department of Financial Services (NYDFS) and the California Department of Financial Protection and Innovation (DFPI) are positioned to assume some of the regulatory responsibilities the CFPB will no longer oversee. Despite this reduced role, the CFPB will retain some regulatory authority over crypto due to its statutory obligations. These obligations cannot be altered without Congressional approval, which means the agency will still maintain control over some aspects of cryptocurrency regulation.

Massachusetts Senator Elizabeth Warren, who helped found the CFPB in 2007, has criticized the current administration for dismantling consumer protection measures. She described the move as an attempt to give private financial institutions more control over the system. However, Warren acknowledged that the CFPB cannot be fully dismantled by executive action alone and that such a change would require Congressional approval.

The reduction in the CFPB’s regulatory role marks a significant shift in how cryptocurrency will be regulated in the United States. With the SEC and state agencies now taking center stage, the crypto industry may face a more fragmented regulatory landscape. Some states may take a more active role in regulating the industry, while others may be less involved.

As the regulatory environment evolves, the future of cryptocurrency oversight remains uncertain. Industry stakeholders will be closely watching how these changes affect market stability, investor protection, and innovation in a sector that is already known for its volatility. The CFPB’s reduced role signals a larger shift in the federal regulatory framework for cryptocurrency, which could have lasting effects on the industry.