US Lawmakers See All the “Flashing Warning Signs” of Cryptocurrency Putting USD at Risk
Shadowy, faceless groups of super coders and miners have replaced giant banks, they say.
The US Senate Banking Committee held a hearing on Tuesday discussing what cryptocurrencies are good for.
Some lawmakers spoke in favor of the industry, with Sen. Cynthia Lummis, R-Wyo., saying the transparency of open source finance can promote financial inclusion. Sen. Sherrod Brown, D-Ohio, a critic, suggested that blockchain technology could have many useful non-financial applications.
Meanwhile, Elizabeth Warren (D-Mass.), to whom “all the warning signs are flashing,” in terms of hype, volatility, and false wild claims, called for tighter regulation.
“Instead of leaving our system, our financial system at the whims of giant banks crypto puts the system at the whims of some shadowy, faceless group of super coders and miners, which doesn’t sound better to me.”
In a letter on Tuesday, Warren also called on Treasury Secretary Janet Yellen to draft a framework to regulate cryptocurrencies because as demand for them grows and they become more embedded into the financial system, the system itself and consumers are getting “under growing threats,” she wrote.
Led by Yellen, the President’s Working Group on Financial Markets' recent private meeting on the financial risks posed by stablecoins, were particularly concerned about Facebook’s Diem and Tether’s claims that it holds massive amounts of commercial paper.
Participants were also concerned that the situation could be susceptible to a chaotic investor exodus while likening it to an unregulated money-market mutual fund.
During the hearing, lawmakers basically focused on the decentralized nature of cryptocurrencies and system failure in the market that they feel could ripple over to the traditional financial system.
“We need to acknowledge the power concentrations within it and make thoughtful policy and risk decisions about how to address that power,” said Angela Walch, a professor at St. Mary’s University School of Law and a research associate at the UCL Centre for Blockchain Technologies, according to whom, crypto has the same problems as the existing financial system.
Sen. Pat Toomey, R-Pa., who has invested in crypto assets, talked about Bitcoin’s use as a store of value and pressed the panel about the developing problems in cryptocurrency “cascading into the conventional financial system.”
.@SenToomey, United States Senator, "Governments can't print trillions of it […] We've seen in Venezuela how people can use #bitcoin to store value when their government devalues their currency" pic.twitter.com/peq7JcW9bj
— Documenting Bitcoin 📄 (@DocumentingBTC) July 27, 2021
Others like Brown, who see the potential in blockchain technology, continue to be wary of crypto and see “nothing democratic or transparent about a shady diffuse network of online funny money.”
He called for “smart regulations” to protect consumers from crypto “extortionists” and their “phony populist marketing.”
Brown also said that crypto assets are putting “Americans' hard-earned money at risk,” adding that people don’t trust banks, especially not the biggest banks, and these new technologies just mirror the Wall Street model.
Amidst this, Sen. Jon Tester (D-Mont.) brought in his own theory as he pointed to China’s Bitcoin mining exodus as a state-sanctioned plan to achieve dominance over the US.
“They’re shipping ‘em around the world because they know these guys can raise hell with our financial system.”
Meanwhile, Jerry Brito, executive director at the advocacy organization Coin Center, said that the US shouldn’t shy away from cryptos, which “ultimately are commodities,” but install appropriate guardrails in place for hedge funds and other market participants.