United States: this senator assures that cryptocurrency is 'the new shadow bank'

Senator Elizabeth Warren tackles the cryptocurrency industry

Elizabeth Warren, the vice chairwoman of the Democratic caucus in the US Senate, has once again come out against the cryptocurrency industry. In an interview with the New York Times, the Democrat called on US financial regulators to regulate digital currencies.

“Cryptocurrency is the new shadow bank. It provides many of the same services, but without the consumer protection or financial stability that supports the traditional system, Elizabeth Warren opined.

The senator refers to the crypto-asset industry as shadow banking.” This term refers to all financial intermediaries that are outside the traditional banking system. De facto, their activities are not guaranteed by States and Central Banks. In French, it is also called “finance de l’ombre” or “finance fantôme”.

Initially, the term shadow bank” refers to investment banks, investment funds, pension funds and exchange-traded funds. For Elizabeth Warren, these entities are gradually giving way to cryptocurrency-related services, such as exchange platforms or DeFi protocols.

Elizabeth Warren was reacting to the formal notice of BlockFi, a US platform that allows you to save or make loans in cryptocurrencies. Alabama has in effect ordered BlockFi to suspend interest-generating cryptocurrency accounts. New Jersey, meanwhile, has asked the company to cease operations.

On the same topic – BlockFi launches its Visa “crypto-cards” that reward users with cryptocurrencies

Elizabeth Warren declares war on stablecoins

During her interview with the New York Times, the senator also suggested the possibility of going after stablecoins, the cryptocurrencies backed by fiat currency. She believes that the U.S. Federal Reserve should ban banks from holding cash deposits that back stablecoins.” According to her, this move could stem the surge in the cryptocurrency market.

By acting against stablecoins, Elizabeth Warren is mostly preparing for the arrival of a digital dollar. In the past, the senator has already encouraged the creation of this digital central bank currency on several occasions. She believes that the implementation of a digital dollar could help stimulate the economy for the benefit of the poorest Americans.

It’s not the first time the Democrat has attacked cryptocurrencies. Back in June, Elizabeth Warren had actually recycled most of the hackneyed criticisms leveled at digital currencies. The senator was already calling on financial regulators to act to protect consumers.

“Cryptocurrency has created opportunities to defraud investors, aid criminals and worsen the climate crisis. The threats posted show that Congress and federal regulators can’t keep hiding, hoping that cryptocurrency will go away. It won’t. It’stime to face these issues head on, the Consumer Financial Protection Bureau’s special counsel told Reuters.

Read more – U.S. Congressmen call on Federal Reserve to create a ‘digital dollar

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About the author: Florian Bayard

United States: this senator assures that cryptocurrency is 'the new shadow bank'