US Senator Calls Crypto Market «Shadow Bank»

US Senator Elizabeth Warren is one of the most prominent cryptocurrency skeptics in the US government. The day before, she confirmed this title, calling the digital asset industry a «new shadow bank .

» In her Sunday interview with the New York Times, Warren stated that the spread of Bitcoin and altcoins around the world encourages the shadow economy, but that «the crypto market does not care about consumer protection or financial stability. » Let’s talk about the situation in more detail.

Recall that the cryptocurrency industry often comes under attack by officials, bankers and other representatives of the classical financial system. At first, the coins were actively criticized under the pretext of their anonymity, since criminals would surely use this.

Over time, the niche has even developed a reputation to match – although it is flawed. In fact, cryptocurrencies have transparent blockchains, so anyone can see the details of any transaction along with the contents of the wallets. This means that if you link a person’s identity with his address in the blockchain, law enforcement agencies will be able to see all his transfers. This feature is called pseudo-anonymity.

Some cryptocurrencies, like Monero, do offer complete anonymity for network members. However, this time Senator Elizabeth Warren was not worried about them – for some reason she is worried about stablecoins, that is, cryptocurrencies pegged to the value of national currencies like the dollar.

What will happen to cryptocurrencies

She is most concerned about stablecoins – coins with a stable value backed by local currencies. Warren even proposed to completely ban American banks from holding dollars in their accounts to support projects such as Tether or USDC Coin .

Recall that in accordance with the legislation, these projects provide the volume of their cryptocurrency in circulation with bank reserves. Moreover, we are talking not only about cash, but also other assets. For example, until recently, the creators of the USDC provided it exclusively with dollars in the bank, but in August the situation changed . Now coins in circulation provide, among other things, other assets at an appropriate value – but Warren is not happy with this anyway.

Elizabeth Warren United States government of cryptocurrency

Senator Elizabeth Warren

The total capitalization of stablecoins has grown from $ 37 billion to $ 123 billion since the beginning of this year, according to Cointelegraph . Note that the expansion of the use of stablecoins is perceived by experts as a clear sign of a bull market in crypto, since it is these coins that serve as a bridge for injecting new capital into BTC.

In addition, stablecoins insure the market from the final transition from the growth stage to the fall. The fact is that large traders and investors often sell their cryptocurrencies in exchange for stables before market crashes. In this way, they maintain the dollar value of their portfolio and can then reopen positions – but at lower prices due to the market decline. In 2017, this tool was practically not used.

Warren’s initiative is quite radical, but fortunately, this is just her point of view. The US government has not yet openly banned stablecoins – and this is good, because they are one of the foundations of the crypto market. As for the shadow economy, everything is much simpler here: stablecoins are much easier to track than regular currency, so the very fact of their development does not in any way affect the activity of financial criminals. Therefore, the senator’s point of view looks rather like an attempt under a far-fetched pretext to put pressure on the development of the market.

Most importantly, stablecoin issuers like Tether USDT can block cryptocurrencies on addresses in the Ethereum network. This feature is used against criminals who hack various blockchain projects .

But the US Securities and Exchange Commission sees a real threat. On the eve of one of the divisions of the financial regulator issued a warning regarding the «huge losses» that individual investors have experienced up to this time due to the activity of fraudsters. Here is a quote from Cointelegraph representatives from the agency .

Investors may be less skeptical about investment opportunities that include something new or “cutting edge”. In addition, they are prone to the fear of missing out on potential profits.

As a reminder of the consequences of what happens after «blind trust in cryptocurrency gurus», the SEC cited the example of the BitConnect crypto pyramid , which collapsed a couple of years ago, causing hundreds of millions of losses. To help investors avoid falling into the trap, the financial regulator recommends that you understand and assess the risks, pay attention to the warning signs of possible fraud, including promises of high return on investments, lack of licenses, and fake project reviews.

We believe that Warren’s lines are yet another manifestation of the Senator’s lack of cutting edge and love of technology. Since they have not been heard for the first time, there is no need to fear a worsening of the situation in the digital assets niche. However, it is important to remember that officials do have the tools to influence the coin market. We were convinced of this the day before due to the increased attention of the US Securities and Exchange Commission to the developers of the Uniswap exchange.

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