Senator Elizabeth Warren: Regulating Stablecoins 'Could Amplify Risks'

Senator Elizabeth Warren (D-Mass.) has thrown a wrench into efforts to pass a stablecoin regulation bill in the US, warning lawmakers about the potential dangers stablecoins pose to the financial system and national security.

What Happened: In a letter obtained by Politico, Warren targeted the efforts by Committee Chair Patrick McHenry (R-N.C.) and Representative Maxine Waters (D-Calif.) to navigate the complex $157 billion stablecoin market towards regulation, cautioning against the potential risks to the banking system and national security.

Highlighting the precarious nature of integrating stablecoins more deeply into the financial system, Warren stated, “Efforts to create new regulatory frameworks around the $157 billion stablecoin market, including those that aim to fold stablecoins deeper into the banking sector, could amplify and entrench these risks rather than mitigate them.”

She further implored, “I urge you to remember the gravity of these risks as your committee consider proposals to regulate stablecoins and avoid introducing stablecoin legislation that holds the potential of unleashing another financial crisis.”

The contentious stablecoin bill previously advanced through the House Financial Services Committee during the summer has since been ensnared in bipartisan disagreements.

Warren’s letter could complicate the bill’s trajectory further, especially within the Senate Banking Committee where she is a member.

Also Read: Why Ripple CEO Brad Garlinghouse Predicts A $5 Trillion Crypto Market Cap In 2024

Adding to her critique, Warren pointed out the risk of stablecoins being exploited for illicit finance, referencing the U.S. Department of Treasury’s concerns about their use in terrorist financing.

The Treasury had scrutinized stablecoin use in a report earlier in the year, underscoring the importance of vigilance in this area.

Looking ahead to a Senate Banking Committee hearing focused on illicit finance, with U.S. Deputy Treasury Secretary Wally Adeyemo set to testify, Warren stressed the importance of cautious regulation.

“As Congress continues to deliberate over the appropriate regulatory framework for stablecoins, policymakers should be wary of efforts to integrate stablecoins into the formal banking system – or extend any of the concomitant safety net protections to stablecoin issuers – without strong rules that ensure safety and soundness,” she advised.

Senator Warren’s emphasis on stringent regulation to safeguard financial stability and national security against the backdrop of stablecoin integration into mainstream finance is a narrative that will undoubtedly resonate at Benzinga’s upcoming Future of Digital Assets conference on Nov. 19.

Attendees will delve into these discussions, unpacking the intricacies of regulatory proposals and their far-reaching implications on the digital assets sector.

Read Next: Memecoin Mania Meets Social Media: BONSAI Blooms On Lens Protocol With $1M Raise

Image: Shutterstock