- US Senator Elizabeth Warren lashes out against cryptocurrency in the latest outburst of yet another crypto skeptic.
- The Senator referred to the asset class as the “new shadow bank” that failed to offer consumer protections for its users.
- This is coming on the heels of an outcry from Washington in a bid to stifle the growth and influence of cryptocurrencies.
The seat of power in the United States is not hiding its stance on cryptocurrencies with government officials being vocal against digital currencies. Democrat Senator, Elizabeth Warren has joined the ranks of critics after alluding that cryptocurrencies are a shadow bank that poses a great risk to investors in a recent interview with the New York Times.
Elizabeth Warren’s Stance
Cryptocurrencies have been christened “the new shadow bank” by Elizabeth Warren, a US Senator under the Democrats party. She made the statement in an interview with the New York Times amid the increasing influence of cryptocurrencies in the financial system. The Senator noted that while cryptocurrencies provide services that are similar to a bank, it is “without the consumer protections or financial stability” which the traditional systems provide.
She went on to describe them as akin to “spinning straw into gold” which is essentially a task in futility. Warren expressed concerns over the rise of stablecoins and urged regulatory agencies to tinker with the possibility of precluding US banks from holding reserves to back stablecoins.
On the other hand, Gary Gensler, Chair of the SEC has adopted a milder approach to the cryptocurrency debacle by recognizing their influence and made for increased regulation over the “Wild West” of cryptocurrencies.
It seems the recent comments of the Senator have done little to dampen the spirits of the market as the global cryptocurrency market capitalization is still over $2 trillion. Bitcoin and other cryptocurrencies continue to ride the bullish wave into the start of the new week.
The Shadow Bank
The term, shadow bank is used to refer to bank activities that occur outside the confines of the traditional banking institution. Deducing from the above, it can be inferred that cryptocurrencies have the trappings of a shadow bank.
Activities such as lending and borrowing are becoming ingrained in cryptocurrencies because of the development and adoption of DeFi protocols. BlockFi, a firm based around cryptocurrencies offers users the ability to earn interest on their cryptocurrency deposits as though it were a regular bank.
As adoption rates continue to soar, we could see the marriage between traditional finance and decentralized finance play out in the space. Already, Wall Street giants like JPMorgan and Morgan Stanley are taking steps to incorporate cryptocurrencies.
Why It Matters
The opinions of government officials are taken with a degree of seriousness by the investors because it often forms the basis of policies. These policies have the potential to improve or stifle the growth of cryptocurrencies.