As cryptocurrency gains more and more popularity in the US, the Senate is growing concerned about its inherent risks. On Monday, Elizabeth Warren, a member of the US Senate, wrote to Janet Yellen, the Treasury Secretary, expressing those concerns. She explained various issues that would arise as a result of cryptocurrency’s rising popularity.
Warren expressed that a cohesive and coordinated regulatory strategy to alleviate growing crypto risks was much needed. She explained that she addressed Yellen because of her capacity as Chair of the Financial Stability Oversight Council. Moreover, she reiterated that the body is responsible for determining and responding to threats to the country’s financial stability.
The Massachusetts senator shared that as crypto demand grows, these unregulated digital assets further integrate into the US financial system. She went into detail regarding the risks that the growing crypto market can pose to other investment vehicles, hedge funds, and banks. The letter makes mention of vulnerability to cyber attacks, as well as the problems surrounding decentralized finance and stablecoins in particular.
She highlights that the council needs to figure out if these trends can increase worries beyond just consumer and investor protection. To be more specific, she referred to the possibility of broader systemic weaknesses that could negatively impact financial security.
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Because various authorities made efforts to tame the dynamic and rapidly-growing crypto market, Warren discussed the prerequisites of a potential solution. She stated that any policy response to the above-mentioned risks needs to be holistic and well-planned. Therefore, it can’t be broken amongst various different financial agencies.
This was a means to counter cryptocurrencies’ risk to the US financial system, so it requires far more urgency. Nevertheless, Senator Warren looked towards the future as well, with discussions of regulatory control. She prompted the FSOC to actively participate and take the lead in forming a comprehensive regulatory strategy for cryptocurrencies. She emphasized the direness of the situation by urging her to act with urgency.
She warned that if they wait any longer, the digital assets will further intertwine with the US financial system. As a result, it can face severe consequences if the cryptocurrency market ever faces any sort of stress.
Of course, Senator Warren used her position to urge other bodies to take action as well. Earlier in July, she urged the US Securities and Exchange Commission to fully use its authority in addressed crypto risks. Today is the deadline for the SEC to come up with a response to growing concerns. She also highlighted Congress’ role in bringing attention to the issue. She prompted that members of Congress need to bring solutions to close regulatory gaps. While it’s no surprise that crypto-skeptic Elizabeth Warren was among the first to raise concerns, it’s interesting to see how things will turn out.