Crypto Users Left Vulnerable as CFPB Enforcement Halts

On June 10, Cara Petersen, the acting enforcement director of the Consumer Financial Protection Bureau (CFPB), resigned with a scathing letter criticizing President Donald Trump’s administration. The letter highlighted the “thoughtless” cutbacks at the agency pushed by the Department of Government Efficiency (DOGE). This departure comes amid growing concerns that market participants, including crypto holders, are being left to fend for themselves without adequate consumer protection.

Republican lawmakers and the White House have pledged to streamline the CFPB, ensuring it protects consumers while not stifling innovation. However, prominent figures in the crypto industry have also criticized the agency. Coinbase CEO Brian Armstrong called it “unconstitutional.” The US crypto industry may be advocating for a weakened CFPB to gain advantageous regulations, but in the meantime, its own customers are left vulnerable to account freezes and unresponsive platforms with no clear agency to turn to for help.

The CFPB, a relatively new agency formed by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, has faced criticism from laissez-faire-governance Republicans and the financial industry since its inception. Tesla CEO Elon Musk, who formerly headed DOGE, posted weeks after the election that the agency should be “deleted.” Industry legal and advocacy organizations like Coin Center have also taken issue with CFPB rulemaking. In late November 2024, executive director Peter Van Valkenburgh welcomed Trump’s “day-one” executive order that began reevaluating agency rulemaking, including that by the CFPB and the Securities and Exchange Commission.

After Trump was sworn into office, DOGE began to dismantle government agencies and regulators, laying off thousands of federal employees. By February, acting CFPB Chief Russell Vought had shut most of the agency down and halted enforcement actions. This move was praised by crypto bigwigs like Armstrong, who called it “100% the right move,” and Gemini co-founder Tyler Winklevoss. Much of the crypto industry’s criticism of the CFPB was based on its purported unconstitutionality and its perceived role in hampering innovation in the US. However, this left thousands of consumers without protection as enforcement actions against errant banks and financial institutions disappeared.

Crypto users are also affected. Coinbase alone has received over 8,000 CFPB complaints. Kraken has received 338. On June 2, one reported user said they’ve been locked out of their account for months with no response from the exchange’s support team. David Goose, head of communications at decentralized exchange Osmosis, said he’s in “the same boat,” adding that he’s filed a complaint with the CFPB. “It’s not my first rodeo with Coinbase locking accounts or freezing funds. There’s no real recourse for impacted users,” he added.

The irony of the crypto industry cheering for the agency that would guarantee their users’ protection was not lost on observers. Amanda Fischer, a former SEC chief of staff and adviser to Congress, called the situation “Kafkaesque,” adding that “the CFPB is basically dormant right now in part because [Coinbase] pushed for its closure.” Lauren Saunders, associate director of the National Consumer Law Center, called the situation “a wholesale abandonment of consumer protection, leaving people to fend for themselves when credit card companies, banks, payday lenders and payment apps violate the law.” Doreen Greenwald, national president of NTEU, said, “The only people celebrating a CFPB shutdown are the ones who make money by ripping off American consumers when they borrow money or buy things on credit.”

Some consumer privacy advocates are attempting to fight back against the administration’s cuts and are questioning the legality of DOGE’s actions to gut the CFPB. Immediately after the enforcement wind-down, the National Treasury Employees Union (NTEU), a public employees’ union representing 1,000 workers at the CFPB, sued Vought and sought to block some of his actions, which a court upheld. The NTEU’s case is still under consideration in a federal appeals court, where judges are deliberating on the extent to which the court can instruct the Trump administration to operate the CFPB. Other cases have appeared in the meantime. On June 5, a government ethics organization, Citizens for Responsibility and Ethics in Washington (CREW), announced that it was suing the agency for “failure to release records and failure to grant CREW’s request for expedited processing related to Department of Government Efficiency (DOGE) activity at their agencies.” CREW contends that disclosure is necessary, given the billions of dollars and thousands of jobs DOGE eliminated “all without Congressional authorization to do so and with little transparency.”

Amid these concerns, the CFPB’s detractors continue ahead. Republican Congressman Byron Donalds called it a “rogue agency” on a June 2 Fox News segment. On June 10, Congressman Dan Meuser met with members of the Consumer Bankers Association, a retail bank trade association, to discuss reforms to the CFPB that “ensure financial regulations don’t stifle innovation or access to capital.” As crypto giants cheer the CFPB’s collapse, the people left behind are the same users they claim to serve, now locked out of accounts, ignored by support teams and with no clear path to recourse.

Ask Aime: What's the CFPB's role in protecting crypto users?