US Senator Elizabeth Warren Strikes the DeFi Industry

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US Massachusetts Senator Elizabeth Warren has stepped up the gears in her criticism of decentralized finance and voiced her concerns about how stablecoins will impact the average investor. Discussing stablecoins with the Banking Committee the other day, Warren discussed the potential threats of stablecoins to the US financial system with Professor Hilary J. Allen of the American University Washington College of Law.

DeFi Comment from the US Senator

Hilary Allen noted that while the mass redemption of stablecoins from people who have given up on token investment is unlikely to have systemic consequences for traditional markets at the moment, the DeFi system effects will be more dramatic. Senator Warren believes that as stablecoins provide the lifeblood of the DeFi ecosystem outside of regulated markets, their value impacting traditional finance will plummet when people need stability the most.

Elizabeth Warren described DeFi as the most dangerous part of the crypto world: “This is where the director is not actually. It’s no surprise DeFi is where scammers and counterfeiters mingle with investors. DeFi is the source of danger.”

Professor Allen stated that the potential threat posed by Warren may be in the future of DeFi without addressing his claim about illicit transactions: “I don’t think DeFi can grow without stablecoins. I think he will struggle. At the moment I think DeFi is too limited to affect financial stability. But if it gets bigger, I suspect there will be a real threat there, especially when it’s intertwined with our traditional financial system.”

Stablecoin Bracket

However, the discussion thread “Stablecoins: How They Work, How to Use, and What Are the Risks” follows committee chair Sherrod Brown’s request that crypto companies publish information on consumer and investor protection on stablecoins.

Elizabeth Warren, on the other hand, has previously used controversy and public statements, claiming that cryptocurrencies are mainly linked to illegal activities. In a June meeting discussing central bank digital currencies, the Massachusetts senator said that the crypto world currently lacks consumer protection.