Elizabeth Warren argues that DeFi is a questionable part of the crypto world. This is because of the risks for consumers that it entails.
Criticism of stablecoins
Massachusetts Senator Elizabeth Warren has stepped into the spotlight again. It concerns her comments on the fast-growing sector of decentralized finance (DeFi) and the role of stablecoins.
During a Senate committee hearing, Warren described stablecoins as “the core of the DeFi ecosystem.” They are used to trade between different coins and to borrow money outside the regulated banking system.
Stablecoins are cryptocurrencies pegged 1:1 to fiat currencies such as the US dollar. This means that their prices should remain stable, unlike Bitcoin, for example.
Warren also stated that stablecoins pose risks to consumers and the economy. According to her, they support “one of the most questionable parts of the crypto world; DeFi”. She argues that consumers are poorly protected against fraud.
According to Warren, regulation regarding DeFi is absent. She therefore believes that scammers use this. She said the following:
“Our regulators need to get serious about curbing DeFi before it’s too late.”
At the same hearing, Warren’s party colleague, Senator Sherrod Brown, labeled stablecoins “magic money.” Furthermore, he said they are not even decentralized. However, the Ohio senator disagreed, warning:
“If you put your money in stablecoins, there is no guarantee that you will get it back.”
Warren’s War on Crypto
Senator Warren’s comments about DeFi and stablecoins is just one of many. She has always criticized the crypto industry.
In July, Warren sent a letter to Treasury Secretary Janet Yellen requesting greater oversight of the crypto industry.
“There are too many risks,Warren said at the time. “The hype, the volatility, the wild claims that turn out to be false. As the crypto market grows, so do the risks to our financial stability and our economy.”
Earlier this month, she targeted Bitcoin mining company Greenidge Generation, expressing her concerns about its impact on the environment.
Prior to this, Warren stated in an interview with CNBC that the climate crisis can be fought by “tacking energy-guzzling cryptocurrencies.”