Decentralized finance is dangerous, according to US Senator Warren
In a hearing on Tuesday with the Senate Banking Committee to discuss stablecoins, Warren asked Professor Hilary J. Allen of American University Washington College of Law if a stablecoin rush could potentially endanger the U.S. financial system. . While Allen said that a “mass redemption” of stablecoins by people who have lost faith in tokens would hardly have “systemic consequences” for traditional markets at the moment, the DeFi system would be more likely to suffer the effects.
“DeFi is the most dangerous part of the crypto world,” Warren said. “This is where regulation is actually absent and, no surprise, it’s also where scammers mingle with part-time investors and amateur cryptocurrency traders. In DeFi, you can’t even know if you’re dealing with a terrorist ”.
Allen added that the potential threat posed by Warren could relate to DeFi’s future without elaborating on her claim on illicit transactions: “I don’t think DeFi can grow without stablecoins. I think it would be hard. Right now, I think DeFi is contained to the point where it won’t have any impact on financial stability, but if it grows, I think it can become a threat, particularly if it intertwines with our traditional financial system. ”
The discussion among US lawmakers attending the hearing, called “Stablecoins: How Do They Work, How Are They Used, and What Are Their Risks?”, Saw them agree with the chairman of the commission Sherrod Brown who requires cryptographic companies to release information relating to consumer and investor protection on stablecoins.
Warren has previously used public statements to claim that cryptocurrencies are primarily linked to illegal activities. In a hearing in June to discuss central bank digital currencies, the Massachusetts senator said that “the cryptocurrency world currently has no consumer protection” and referred to many tokens as “bogus” investments. He also criticized the Ethereum network’s high transaction fees during times of price volatility.