The U.S. lawmaker claimed that the value of stablecoins would “take a
nosedive,” with small investors largely feeling the effects of a
potential downturn.
Massachusetts Senator Elizabeth Warren did not hold back in her
criticism of decentralized finance (DeFi), expressing concern about how a
run on stablecoins would affect the average investor.
In a Tuesday hearing with the Senate Banking Committee discussing stablecoins, Warren questioned Hilary
Allen, a professor at the American University Washington College of
Law, as to whether a run on stablecoins could potentially endanger the
United States financial system. Though Allen said an “en masse”
redemption of stablecoins from people who had lost faith in the tokens
would be unlikely to have “systemic consequences” for traditional
markets at present, the DeFi system would be more likely to feel the
effects.
Warren countered that because stablecoins provided “the
lifeblood of the DeFi ecosystem” outside of regulated markets, she
believed their value would “take a nosedive precisely when people most
need stability,” with the impact affecting traditional finance.
“DeFi
is the most dangerous part of the crypto world,” said Warren. “This is
where the regulation is effectively absent, and — no surprise — it’s
where the scammers and the cheats and the swindlers mix among part-time
investors and first-time crypto traders. In DeFi, someone can’t even
tell if they’re dealing with a terrorist.”
Allen added that the
potential threat Warren posited may be in DeFi’s future, without
addressing her claim about illicit transactions:
“I don’t
think DeFi can grow without stablecoins. I think it would struggle.
Right now, I think DeFi is contained to the point where it won’t impact
financial stability, but if it grows, I think there’s a real threat
there, particularly if it becomes intertwined with our traditional
financial system.”
The discussion among U.S. lawmakers
present at the hearing — named “Stablecoins: How Do They Work, How Are
They Used, and What Are Their Risks?” — follows committee chair Sherrod
Brown requesting crypto firms release information
related to consumer and investor protection on stablecoins. Allen
appeared as a witness alongside Alexis Goldstein, director of financial
policy at Open Markets; Jai Massari, partner at Davis Polk &
Wardwell; and Dante Disparte, chief strategy officer and head of global
policy at Circle.
Warren
has previously used hearings and public statements to claim
cryptocurrencies are mainly tied to illegal activities. In a June
hearing discussing central bank digital currencies,
the Massachusetts senator said the “crypto world currently has no
consumer protection” and referred to many tokens as “bogus” investments.
She has also criticized the Ethereum network’s high transaction fees during periods of price volatility.
source link : https://cointelegraph.com/news/defi-is-the-most-dangerous-part-of-the-crypto-world-says-senator-elizabeth-warren
