US Senator Elizabeth Warren (D-MA) is issuing a warning against a cryptocurrency subsector that she says poses a grave danger to the economy.
Senator Warren says in a U.S. Senate Banking, Housing, and Urban Affairs Committee hearing on stablecoins that decentralized finance (DeFi) poses the biggest risk to the economy as it is largely unregulated.
“DeFi is the most dangerous part of the crypto world.
This is where the regulation is effectively absent and no surprise it’s where the scammers and the cheats and the swindlers mix among part-time investors and first-time crypto traders.
In DeFi someone can’t even tell if they’re dealing with a terrorist.”
According to the U.S. Senator, DeFi depends on stablecoins and therefore wouldn’t exist without the fiat-pegged cryptocurrencies.
“Stablecoins provide the lifeblood of the DeFi ecosystem.
In DeFi, people need stablecoins to trade between different coins, to trade derivatives, to lend and borrow money all outside the regulated banking system.
Without stablecoins DeFi comes to a halt.”
Senator Warren consequently says that regulators need to act as stablecoins are “propping up” DeFi.
“This is a risk to traders, a risk to our economy.
The time to act is before it all blows up. Stablecoins have no regulators, no independent auditors, no guarantors, nothing. And they are propping up one of the shadiest parts of the crypto world.
The place where consumers are least protected from getting scammed. Our regulators need to get serious about clamping down on these risks before it is too late.”
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Featured Image: Shutterstock/Tithi Luadthong/Natalia Siiatovskaia