U.S. Senator Elizabeth Warren wrote a letter to Treasury Secretary Janet Yellen on Monday highlighting various concerns regarding the risk posed by cryptocurrency.
“I am writing to you in your capacity as Chair of the Financial Stability Oversight Council (FSOC) regarding the need for a coordinated and cohesive regulatory strategy to mitigate the growing risk that cryptocurrencies pose to the financial system.” Warren wrote.
“FSOC to act with urgency and use it statutory authority to address cryptocurrencies’ risks and ensure the safety and stability of our financial system,” the Massachusetts Democrat wrote in a letter to Yellen.
Warren is concerned about dangers cryptocurrencies pose to investors, consumers, and the environment “in the absence of sufficient regulation”. She claimed growing demand for crypto and its approximately $2 trillion market cap could also pose systemic risks.
Warren emphasized concern over “financial stability” and said that the council must determine these trends. She raises concern over financial stability beyond investor and consumer protection.
Senator Warren also wrote that the financial system’s increasing exposure to cryptocurrencies means that “material distress in the cryptocurrency market could spread throughout the financial sector.”
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“The longer that the United States waits to adapt the proper regulatory regime for these assets, the more likely they will become so intertwined in our financial system that could be potentially serious consequences if this market comes under stress.”
In Warren’s view, an underregulated cryptocurrency market poses a high risk to hedge funds and banks. She also cited concerns about the use of cryptocurrency in cyberattacks and the threat posed by stablecoins.
