this senator assures that cryptocurrency is “the new shadow bank”

Senator Elizabeth Warren tackles the cryptocurrency industry

Elizabeth Warren, the Democratic Group vice-chair in the United States Senate, has once again come out against the cryptocurrency industry. In an interview with the New York Times, the Democrat called on U.S. 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 underpins the traditional system, ”said Elizabeth Warren.

The senator refers to the crypto-asset sector under the name “shadow bank”. This expression designates all financial intermediaries that are outside the traditional banking system. De facto, their activities are not guaranteed by States and Central Banks. In French, we also speak of “shadow finance” or “phantom finance”.

Initially, the term “shadow bank” rather evokes investment banks, investment funds, pension funds or even 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 from BlockFi, an American platform that allows you to save or make loans in cryptocurrency. Alabama has in effect ordered BlockFi to suspend interest-generating cryptocurrency accounts. For its part, New Jersey has asked the company to cease operations.

On the same subject – BlockFi launches its Visa “crypto-cards” which reward users with cryptocurrency

Elizabeth Warren declares war on stablecoins

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

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

This is not the first time that the Democrat has taken on cryptocurrency. Last June, Elizabeth Warren had also recycled most of the hackneyed criticism of digital currencies. The senator was already calling on financial regulators to act to protect consumers.

“Cryptocurrency has created opportunities to defraud investors, help criminals and worsen the climate crisis. The threats posted show that Congress and federal regulators cannot continue to go into hiding, hoping the cryptocurrency will disappear. This will not be the case. It is time to tackle these problems head-on, ”the Bureau’s special adviser on financial consumer protection told Reuters.

To go further – Members of the US Congress call on the Federal Reserve to create a “digital dollar”


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About the author: Florian Bayard

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