In a Senate hearing concerning stablecoins, Elzabeth Warren has harshly criticised the DeFi sector once again.
Warren yells at crypto
Elizabeth Warren is known to be one of the most outspoken crypto skeptics among US politicians. In October, she co-authored a letter to Mark Zuckerberg, demanding the immediate termination of Meta’s digital wallet Novi. Earlier this year, Warren warned about “shadowy super-coders” who control the DeFi sector.
In yesterday’s Senate hearing titled “Stablecoins: How Do They Work, How Are They Used, and What Are Their Risks?”, Warren reiterated this stance, calling decentralized finance the “most dangerous part of the crypto world”:
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.
Stablecoins are “the lifeblood of DeFi”
Senator Warren wanted to know whether a bank run on stablecoins could lead to a systemic risk for the whole finance sector, calling stablecoins the “lifeblood of DeFi”. Hilary Allen from the American University Washington College of Law countered that this traditional market would likely not be affected by such an event at this point, but the DeFi sector certainly would.
In the future, this might however become a growing threat according to Allen:
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.