Senator Elizabeth Warren of Massachusetts stated that it is “worth considering” prohibiting US banks from maintaining reserves to support private stablecoins.
Senator Elizabeth Warren of the United States of America, one of the most outspoken bitcoin doubters in the federal government, has dubbed the cryptocurrency sector the “new shadow bank.” Warren stated in a Sept. 5 interview with the New York Times that while the cryptocurrency industry provides “much of the same services” as shadow banks, it lacks “consumer safeguards or financial stability that underpin the old system.”
Warren voiced concern about the burgeoning market for stablecoins, a sort of cryptocurrency whose value can be tethered to the value of other assets, such as fiat currencies such as the US dollar or the euro, or commodities such as gold.
The senator stated that it is “worth considering” prohibiting US banks from keeping the reserves necessary to back private stablecoins, a move that “may essentially bring the market to a halt.”
According to data from Statista and CoinMarketCap, the entire market value of stablecoins such as Tether (USDT) and USDC Coin (USDC) has risen dramatically this year, going from about $37 billion in January to $123 billion at the time of writing. Large stablecoin accumulations have been generally interpreted as a sign of purchasing power for cryptocurrencies such as Bitcoin (BTC), as fiat-pegged stablecoins provide a convenient method for traders to deposit funds on exchanges to purchase and sell crypto.
Warren’s latest comments come as global banking regulators increase their focus on stablecoins such as USDT. According to online reports, the Ontario Securities Commission recently prohibited the first two registered cryptocurrency exchanges in Canada, Wealthsimple, and Coinberry, from offering USDT trading services. In mid-July, US Treasury Secretary Janet Yellen urged banking regulators to build a stablecoin regulatory framework.
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