- Sen. Elizabeth Warren urged House lawmakers to consider the risks posed by stablecoins as they work on a bill to regulate them.
- Warren cautioned against integrating stablecoins into the formal banking system without strong rules to ensure safety and mitigate risks.
- Warren expressed concerns about stablecoins being used for illicit finance, citing remarks from the U.S. Treasury Department.
Senator Elizabeth Warren sent a letter this week to top House lawmakers working on crypto asset regulation, specifically stablecoin legislation. The letter cautions against the potential risks of integrating stablecoins into the formal banking system.
Background on Stablecoins
Stablecoins are cryptocurrencies designed to have a stable value, often pegged to a currency like the US dollar. The stablecoin market has grown significantly, now totaling over $150 billion in circulation. Stablecoins have drawn increasing regulatory attention given their growth and potential risks.
Details of Senator Warren’s Letter
In the letter addressed to House Financial Services Committee Chair Patrick McHenry (R-NC) and Rep. Maxine Waters (D-CA), Senator Warren warned of the risks stablecoins could pose to consumers and financial stability. She advised lawmakers to “remember the gravity of these risks” as they consider stablecoin legislation.
Warren cautioned that integrating stablecoins into the banking system could “amplify and entrench” risks rather than mitigate them. She expressed concerns over stablecoins facilitating illicit finance, referencing a recent Treasury report on their use in terrorist financing.
The Path Forward on Stablecoin Legislation
The House Financial Services Committee advanced a stablecoin bill last year, but it stalled over disputes on state vs federal regulation. Senator Warren’s letter signals continued skepticism in the Senate, which has focused on other priorities.
Warren sits on the Senate Banking Committee, which oversees stablecoin legislation. The committee’s chair, Senator Sherrod Brown, has also raised concerns over crypto assets. Warren advised against pushing forward any legislation that could introduce new systemic risks.
