US Senator Elizabeth Warren called on regulators to ban decentralized finance (defi) and stablecoins “before it’s too late.” She said: “Defi is the most dangerous part of the cryptocurrency world…it is a place where scammers, scammers, and scammers mix between part-time investors and first-time cryptocurrency traders.”

U.S. Senator urges regulators to crack down on Defi and stablecoins

In a hearing before the Senate Committee on Banking, Housing and Urban Affairs on Wednesday, U.S. Senator Elizabeth Warren (D-Mass.) called on regulators to “ban” stablecoins and decentralized finance “before it’s too late” )platform. “

She proposed the stablecoin tether (USDT) And U.S. dollar coins (USDC). In response to Senator Warren, Alexis Goldstein, director of financial policy at the Open Market Institute, explained that stablecoins “may not always be supported one-to-one…because those who support these tokens Assets are usually not real U.S. dollars.”

Warren pointed out that according to Tether’s own report, “only about 10% of the assets supporting its stablecoins are real dollars in the bank. 90% are something else—not real dollars.” In addition, she emphasized that the report “In fact, it has not been verified by a comprehensive audit of the financial statements, nor has it been verified by any government regulatory agency.”

While pointing out that “stable coins are not always stable”, Warren described: “The situation is worse than this. In times of economic downturn, people are most likely to cash out high-risk financial products and invest in them. The real U.S. dollar. It is when people need stability most, stablecoins will drop sharply, and this kind of bank run mentality may eventually destroy our entire economy.” The senator elaborated:

Defi is the most dangerous part of the crypto world. This is where regulation actually doesn’t exist, and—not surprisingly—this is where scammers, scammers, and scammers mix between part-time investors and first-time cryptocurrency traders. Shooting, in Defi, someone can’t even tell if they are dealing with terrorists.

She continued: “Stablecoins provide the lifeblood of the Defi ecosystem. In Defi, people need stablecoins to trade between different currencies, trade derivatives, and borrow funds-all of which are in the regulated banking system. In addition. If there is no stablecoin, Defi will stop.”

At the hearing, Hilary Allen, a professor at the American University School of Law, answered questions about whether stablecoins pose a risk to the US financial system. Warren asked the professor: “Will Defi threaten our financial stability? If there is no stablecoin, can Defi continue to grow?”

Allen replied: “I think Defi cannot grow without stablecoins. I think it will struggle. At present, I think Defi has been controlled to the extent that it will not affect financial stability, but if it grows, I think there is a real The threat. Especially if it is intertwined with our traditional financial system, and the industry is interested in this integration in traditional finance and cryptocurrency. Therefore, I think it’s important not to allow stablecoins to drive this growth.”

Emphasizes that “stable coins have no regulators, independent auditors, no guarantors, nothing. They are supporting one of the darkest parts of the cryptocurrency world-where consumers are the least protected and will not be Lie,” Senator Warren concluded:

This is a risk for traders…for our economy. The time has come for action, and everything is not over… Our regulators need to take these risks seriously before it is too late.

What do you think of Senator Elizabeth Warren’s comments? Please let us know in the comments section below.

Kevin Helms

As a student of Austrian economics, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects, and the intersection of economics and cryptography.