Massachusetts Senator Elizabeth Warren did not hold back in her criticism of decentralized finance and expressed concern about how a high demand for stablecoins would affect the average investor.
In a Tuesday hearing with the Senate Banking Committee on stablecoins, Warren asked Professor Hilary J. Allen of the American University Washington School of Law if a massive demand for stablecoins could jeopardize the financial system. from USA Although Allen said that a “mass” redemption of stablecoins from people who had lost faith in tokens would likely not have “systemic consequences” for traditional markets today, the DeFi system is more likely to feel the effects..
Warren responded that because stablecoins provided “the lifeblood of the DeFi ecosystem” outside of regulated markets, she believed their value would “plummet precisely when people need stability the most” with the impact that affects traditional finance. .
“DeFi is the most dangerous part of the crypto world,” Warren said. “This is where regulation is effectively absent and, not surprisingly, this is where scammers, scams, and whippers mix between part-time investors and cryptocurrency traders for the first time. At DeFi, someone can’t even tell if they are dealing with a terrorist. “
Allen added that the potential threat that Warren posed may lie in DeFi’s future without addressing his claim about illicit transactions:
“I don’t think DeFi can grow without stablecoins. I think it would have problems. Right now, I think DeFi is contained to the point where it will not affect financial stability, but if it grows, I think there is a real threat there, particularly if it is intertwined with our traditional financial system. “
The discussion between the US legislators present at the hearing, called Stablecoins: how do they work, how are they used and what are their risks?, follows committee chair Sherrod Brown, requesting crypto companies to disclose information related to consumer and investor protection in stablecoins. Professor Allen appeared before a witness alongside Alexis Goldstein, director of financial policy at Open Markets, Jai Massari, partner at Davis Polk & Wardwell, and Dante Disparte, director of strategy and director of global policy at Circle.
Warren has previously used hearings and public statements to claim that cryptocurrencies are primarily linked to illegal activities.. In a June hearing on central bank digital currencies, the Massachusetts senator said that “the world of cryptocurrencies currently has no consumer protection” and referred to many tokens as “fake” investments. He has also criticized the Ethereum network’s high transaction fees during periods of price volatility.
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