In a tumultuous day for American cryptocurrency regulations, Senator Elizabeth Warren has branded cryptocurrency a threat to the US banking system as she demands Treasury Secretary Janet Yellen brings in a strict crypto regulatory framework.
This preceded a troubled Senate Banking Committee hearing titled ‘Cryptocurrencies: What Are They Good For?’, which saw numerous senators wrestle with the idea and implications of cryptocurrency for the economy.
In Warren’s letter, she urged Yellen to use her position as Chair of the Financial Stability Oversight Committee (FSOC) to develop a “coordinated and cohesive regulatory strategy” in response to her concerns about “the dangers cryptocurrencies pose to investors, consumers, and the environment”.
Warren, a Bitcoin (BTC) opponent, went on to outline five issues about the increasing role of cryptocurrencies in the US economy.
The concerns include increasing exposure of American hedge funds to crypto assets (projected to be more than 10% of portfolios by 2026), threats to traditional banking systems, fears of a run on stablecoin liquidation impacting fiat monetary systems, the lack of control over DeFi products such as lending and derivatives, and a curious narrative about ransomware payments.
Not a fan of cryptocurrency
This could mark some cause for concern as Yellen has actively said she’s not a fan of cryptocurrencies in the past, accusing BTC of being primarily for illegal transactions.
However, the SEC may stand as a stumbling block, with no plans to regulate cryptocurrency in 2021.
Meanwhile, the Senate Banking Committee hearing on cryptocurrencies turned into something of a kerfuffle.
There was initial confusion about the exact role of crypto miners – with some on the committee keen to mislabel them as financial intermediaries.
The committee quickly moved on to a debate over crypto adoption by in-store merchants with some senators arguing that it was a freedom of choice for vendors, and others – namely Senator Menendez – arguing shops should be cash only to protect the unbanked.
A flurry of heated comments followed on the role of Bitcoin miners in Iran, and potential sanction violations through the asset.
Ransomware, as raised in Warren’s letter, was under discussion. The committee settled this point with the analogy that the Treasury wasn’t responsible for ransoms paid in USD.
The final moments of the meeting appeared to demonstrate little more than a lack of technical understanding relating to DeFi products and network bugs.
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