Senator Elizabeth Warren: DeFi Is The Most Dangerous Area Of Crypto
Senator Elizabeth Warren called regulators to intervene DeFi by regulating stablecoins in her recent submission to the US Senate Banking, Housing, and Urban Affairs Committee.
According to Senator Warren, decentralized finance or DeFi is the most dangerous niche in crypto.
She called DeFi a place where scammers, cheats, and swindlers get to meet innocent investors and traders. Adding that “someone can’t even tell if they are dealing with a terrorist.”
Warren established a clear relationship between DeFi and Stablecoins, saying that DeFi would not survive without stablecoins since they are the tools used for transactions on the platform.
She said:
“Stablecoins provide the lifeblood of the Defi ecosystem. In Defi, people need stablecoins to trade between different coins, to trade derivatives, to lend and borrow money – all outside the regulated banking system. Without stablecoins, Defi comes to a halt.”
The U.S. Senator also questioned whether DeFi can lead to economic instability and if it can continue to grow without the input of Stablecoins.
Warren stated that stablecoins have controversial backings, continuing that just a fraction of the stablecoins has real dollar-backing based on a report released by the stablecoin issuer Tether.
Saying that the Tether report wasn’t verified nor audited by any government agency, she elaborated her stance:
“It’s worse than that. In troubled economic times, people are most likely to cash out of risky financial products and move into real dollars. Stablecoins will take a nosedive precisely when people most need stability, and that run-on-the-bank mentality could ultimately crash our whole economy.”
Warren opined that stablecoins are not always what they claim to be and that if these issuers were to crash, it could crash the economy.
At the time of writing the total stablecoin market capitalization stands at $157 billion, which could be interpreted that the crypto investment community doesn’t share Senator Warren’s concerns. On the contrary looking into USD, one could raise the same concerns that she is raising on stablecoins, and much more.
