US Senator Warren Sees Benefits of Cryptocurrency but Warns ‘a Run on Crypto’ May Need Federal Bailout
U.S. Senator Elizabeth Warren, a longtime bitcoin skeptic, has shared her view of the benefits of cryptocurrencies. While noting that “The biggest upside to cryptocurrency could be expansion or democratization of access to the financial system,” she warned that the crypto industry may need federal bailout if something goes wrong, such as “a run on crypto.”
Senator Elizabeth Warren Discusses the Biggest Upside and Downside to Cryptocurrencies
Senator Elizabeth Warren was asked about what she thought the U.S. cryptocurrency regulation should look like in an interview with Bloomberg last week. “If people are going to be out there trading it, there needs to be a cop on the beat,” she began. “Because when there’s not a cop on the beat in any market, then it’s the small traders who get cheated, and that’s what always worries me.”
The senator from Massachusetts continued: “This is about putting some basic rules in place so that anyone can trade with just some basic confidence that the biggest kinds of scams will have a cop on the beat to blow the whistle and put a stop to it.”
Responding to a question specifically about what she thought the biggest upside and downside to cryptocurrencies were, Warren replied:
The biggest upside to cryptocurrency could be expansion or democratization of access to the financial system.
“Right now, in the United States, we have tens of millions of people who are either unbanked or underbanked, which means they have to go to check cashers to pay 3% of their paycheck just to get their cash,” she described. “They have to pay money in order to make a payment on their utilities or to pay the rent payment and that’s costing those people a lot.”
The senator detailed: “It is possible that moving to a digital currency system, or I should say expanding to a digital currency system, could bring in more people and there are a lot of different ways that could be designed.”
As for the downside to cryptocurrency, Senator Warren said:
The downside, of course, is so long as it’s an unregulated system, you might be pulling more people in so that they can get cheated and that’s not what we want.
She warned that the bigger the cryptocurrency market gets, and the more it stays outside of the financial system, the more we could be facing another financial crash similar to the one in 2008. She cautioned: “If something goes wrong, there’s a run on crypto, there’s a problem elsewhere in the economy, I don’t want the U.S. taxpayer to be the one who gets called on to back this up.”
Many people took to Twitter to respond to Warren’s comment about a run on crypto. Some explained that she is still thinking like a banker and crypto is not like the stock market where bankers go to the government for a bailout after a crash. Edge CEO Paul Puey opined:
You can’t have a run on crypto. You can’t bail out crypto. You don’t need to. This is the ‘why’ of crypto.
Senator Warren has long been a bitcoin skeptic. In May, she bashed cryptocurrencies citing environmental impact and investor protection. She also agreed with Treasury Secretary Janet Yellen that cryptocurrencies are mostly used in illicit financing.
Recently, Senator Warren has been pressing for regulation of the crypto sector. She has urged Yellen to quickly adopt a policy to mitigate crypto’s risks. She also asked the chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, to urgently come up with a policy on crypto and for the SEC to use its “full authority” to regulate cryptocurrency trading.