Senator Elizabeth Warren presses regulatory bodies to “do their job” of regulating cryptocurrencies as a risk mitigation measure.
Warren argued that digital assets risk the US economy, financial stability, banks, various investment firms and raise the probability of cyberattacks.
US Senator Elizabeth Warren has expressed great concern with the cryptocurrency industry. The politician has urged Treasury Secretary Janet Yellen to note and manage the risks presented by the new asset class.
In a letter addressed to Yellen, Senator Warren pressed for the implementation of regulatory practices on the crypto industry. She urged the Treasurer to develop a “comprehensive and coordinated” guideline for federal agencies to use in crypto regulation. Warren also asked Yellen to exercise her authority through the Financial Stability Oversight Council to make the crypto industry safer.
For a long-time now, Senator Warren has been a critique of digital assets. She has blasted the “highly opaque and volatile” crypto market, saying its lack of regulation is unsustainable. Warren has also written to the Securities and Exchange Commission (SEC) Chair Gary Gensler on the same. The former presidential candidate set a deadline for July 28, by which the regulator should have determined consumer protective measures.
Lately, Warren says as crypto continues to venture mainstream, it could pose significant threats to the current financial system. The five main risks of the under-regulated industry, as she highlights, are cyberattacks, and risks to banks. High exposure to hedge funds and other investment products which lack transparency is another risk. The rest are threats posed by DeFi and stablecoins.
Elizabeth Warren and cryptocurrencies hearing
Earlier on, the Senate Banking Committee held a full committee hearing entitled, “Cryptocurrencies: What are they good for?” It featured comments from Coin Center executive director Jerry Brito, Filecoin Foundation Chair Marta Belcher, and law professor Angela Walch. Coin Center is a non-profit research and advocacy organization for cryptocurrency technology. Filecoin Foundation, on the other hand, supports Filecoin, a decentralized storage network.
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At the hearing, Warren stated that the hype and volatility surrounding the crypto market are “flashing” warning signs. The US economy and financial stability are placed at greater risk as the digital asset market expands, she added. Furthermore, she emphasized that regulators “need to do their job” and intervene “before it’s too late.”
Supporting this viewpoint, Senator Cynthia Lummis pinpointed that transparency in decentralized finance would advance financial inclusion.
Blockchain and the crypto market
Conversely, Senator Sherrod Brown stated that blockchain technology, which underpins digital assets, could have numerous useful non-financial applications. Besides, crypto could still prove a great solution for the current challenges of the financial system, Brown added.
Suggesting a non-avoidance strategy, Brito supported the idea of guidelines for crypto market participants including hedge funds. He added that digital assets were yet to reach the point of systemic implications. His opinions concurred with previous lawmakers’ comments that cryptocurrencies were not viewed as a systemic concern in May. Brito also referred to cryptocurrencies as commodities invested by hedge funds and other large corporations.
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