Elizabeth Warren presses Janet Yellen, regulators to address ‘growing threats’ in crypto market

Sen. Elizabeth Warren urged Treasury Secretary Janet Yellen on Tuesday to identify and remedy risks posed by cryptocurrencies and to craft a “comprehensive and coordinated” framework through which federal agencies can continually regulate virtual coins.

Warren, a member of the Senate Banking Committee and a longtime critic of the nation’s largest banks, pressed the Treasury secretary to use her powers on the Financial Stability Oversight Council to bring about a safer crypto market.

“FSOC must act quickly to use its statutory authority to address cryptocurrencies’ risks and regulate the market to ensure the safety and stability of consumers and our financial system,” the Massachusetts Democrat wrote in a letter to Yellen.

“As the demand for cryptocurrencies continues to grow and these assets become more embedded in our financial system, consumers, the environment, and our financial system are under growing threats,” she added.

Warren cited five risks posed by an underregulated crypto market. In her words, they are:

  • Exposure to hedge funds and other investment vehicles that lack transparency
  • Risks to banks
  • Unique threats posed by stablecoins
  • Use in cyberattacks that can disrupt the financial system
  • Risks from decentralized finance

A spokesperson for the Treasury Department did not immediately respond to CNBC’s request for comment.

Warren’s letter also came as she and other lawmakers on the Senate Banking Committee kicked off a hearing called “Cryptocurrencies: What are they good for?”

Senators will grill Coin Center Executive Director Jerry Brito, Filecoin Foundation Chair Marta Belcher and Angela Walch, a research fellow at the Center for Blockchain Technologies at University College London, during Tuesday’s hearing.

“Cryptocurrencies and other digital assets do pose significant risks currently, and the risks they pose increase as they permeate the traditional financial system and more and more people invest,” Walch told lawmakers in written testimony. Her Twitter biography advises readers to “own no crypto.”

Warren’s letter is the latest in a recent string of calls from Capitol Hill for stricter market regulation.

Perhaps the highest-profile example came in February, when lawmakers in both parties peppered executives from brokerage Robinhood, social media website Reddit, market maker Citadel Securities and video-game retailer GameStop over the “gamification” of stock trading.

Regulating crypto markets has proven trickier, however, given the sheer number of assets and the novelty of the technology behind digital currencies. To date, it remains unclear which body — the FSOC, the Securities and Exchange Commission, or Congress itself — will ultimately bear responsibility for the day-to-day oversight of crypto trading.

That’s likely why Warren addressed her letter to Yellen in her role on the FSOC.

Created in the wake of the 2008 financial crisis, the FSOC is chaired by the Treasury secretary and brings together 10 federal financial regulators, including the Federal Reserve, Securities and Exchange Commission, and Commodities Future Trading Commission.

The FOC’s job is to identify risks to the financial industry and coordinate a regulatory response across Cabinet departments and other agencies, since no single regulator is responsible for monitoring and addressing overall risks to financial stability.


Source: CNBC

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