For Senator Elizabeth Warren, DeFi is dangerous

Senator Elizabeth Warren has once again attacked the world of cryptocurrencies, specifically DeFi. 

She did so during a hearing at the US Senate.

Hostility towards cryptocurrencies

It is well known that Democratic Senator Elizabeth Warren is one of the most critical American politicians towards the world of cryptocurrencies. For some time now, the senator has not missed an opportunity to recommend to all competent bodies the urgency of strictly regulating a market that would be without any rules and therefore potentially dangerous for investors.

Last June, she made an impassioned plea to Treasury Secretary Janet Yellen to use her power as leader of the Financial Stability Oversight Council to “ensure the safety and stability of consumers and our financial system” against the risks of deregulation of the crypto markets.

He had written in a letter addressed to Yellen.

“FSOC must act quickly to use its statutory authority to address cryptocurrencies’ risks and regulate the market to ensure the safety and stability of consumers and our financial system”.

Senator Elizabeth Warren: DeFi is dangerous

On Tuesday during a hearing at the Senate Banking Committee, Warren harshly attacked the world of DeFi, which is experiencing exponential growth, and which she described as the most dangerous part of the cryptocurrency world.

Worryingly, the senator stated:

“Defi is the most dangerous part of the crypto world … it’s where the scammers, the cheats, and the swindlers mix among the part-time investors and first-time crypto traders”.

And as a solution, the senator proposes the prompt crackdown on stablecoins, which she describes as the “lifeblood” of all decentralized finance (DeFi) “before it’s too late”.

In support of her argument and the risks involved in investing in stablecoins, when speaking of Tether, the most widespread of these digital currencies, she pointed out that: 

“Only about 10% of the assets backing its stablecoin are real dollars in the bank. 90% is something else — not real dollars”.

Furthermore, she pointed out that the report: 

“Is not actually verified by a comprehensive audited financial statement or verified by any government regulator”.

Regulation and Crypto

The regulation of cryptocurrencies has long been a debated issue in the US. Both Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen have long called for greater regulation of the crypto market and maintain a very cautious stance on digital assets.

Some states have already put forward plans to regulate cryptocurrencies within their borders, such as Texas or Florida. 

The central government, however, has so far decided to regulate the taxation of capital gains from cryptocurrency trading. 

Although many experts in the field have made proposals for crypto regulation, a concrete plan has yet to materialize.