U.S. Senator Elizabeth Warren (D-MA), a long-standing critic of cryptocurrency, told the New York Times that, in her view, cryptocurrency is “the new shadow bank.”
The Times story focused in large part on BlockFi, the venture-backed crypto lending startup that has drawn the attention of numerous state regulators in the U.S. as part of a broader “scrambling” to catch up on the evolving advance of crypto startups into banking-like services.
Warren’s comments — a “shadow bank” refers to a non-bank financial entity that provides such services outside the remit of normal banking regulation — are a signal that the Massachusetts senator remains a strong critic of cryptocurrency and the industry built up around its applications.
“Crypto is the new shadow bank. It provides many of the same services, but without the consumer protections or financial stability that back up the traditional system,” Warren told The Times. “It’s like spinning straw into gold.”
Per the report, Warren also raised the idea of “[banning] banks in the United States from holding cash deposits backing up stablecoins, which could effectively end the surging market.”
Via a series of public letters, Warren has initiated a dialogue of sorts with the head of the Securities and Exchange Commission, Gary Gensler as well as Janet Yellen, President Joe Biden’s Treasury Secretary.
In July, Warren wrote to Yellen and called for “a coordinated and cohesive regulatory strategy to mitigate the growing risks that cryptocurrencies pose to the financial system.”