Crypto services, according to Elizabeth Warren, are “spinning straw into gold” and are the “new shadow banks.”

Spotlight:

  • Senator Elizabeth Warren told that cryptocurrency providers are “spinning straw into gold.”
  • They provide many of the same services as shadow banks, but without the protections for consumers, according to the Massachusetts Democrat.
  • Warren proposed prohibiting US banks from retaining cash deposits in support of stablecoins.

Senator Elizabeth Warren said in an interview with the New York Times that cryptocurrency businesses are “spinning straw into gold,” criticizing how they operate outside of banking industry regulations.

She was quoted in a story released Sunday as saying, “Crypto is the new shadow bank.” “It provides many of the same services as the traditional system, but without the consumer safeguards or financial stability.”
Warren said, “It’s like spinning straw into gold.”
Transaction-based operations that take place outside of the regular banking sector, and hence beyond the scope of regulatory scrutiny, are referred to as “shadow banking.”

The system had a role in the subprime mortgage crisis that triggered the global financial crisis in 2007-08.
Warren’s remarks were quoted in a story about BlockFi, a crypto company located in New Jersey that aims to service crypto aficionados in the same manner that a Wall Street firm serves traditional financial clients.

Jay Bellamy pays tribute, along with hundreds of others in San Clemente on Sunday, September 5, 2021, to the 13-service members who were killed in a suicide attack in Kabul more than a week ago. Bellamy is a sand sculpture artist who also created an homage near the pier. (Photo by Mindy Schauer, Orange County Register/SCNG)


The Massachusetts Democratic senator also raised the possibility of prohibiting US banks from keeping cash deposits to back up stablecoins, a move that might “essentially end the surging market.”

Warren has always been anti-crypto, and she has called on Treasury Secretary Janet Yellen to enact stricter regulations for linked sectors. The major fear of the legislator is that ordinary investors might be harmed in volatile and uncontrolled markets such as those for crypto assets.

In a July letter to Yellen, she said, “There are a number of ways that our financial system has become exposed to these assets to such an extent that material distress in the cryptocurrency market could spread throughout the financial sector,”

The Securities and Exchange Commission’s chairman, Gary Gensler, has taken a more open stance on cryptocurrencies. However, he believes they will only become popular if authorities establish clear guidelines for the business. Gensler claims to be impartial, if not intrigued, by the technology that underpins cryptocurrencies, but not on shareholder protection.

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