United States Senator Elizabeth Warren, one of the most vocal cryptocurrency skeptics in the U.S. government, has called the cryptocurrency industry the “new shadow bank.”
In a Sept. 5 interview with the New York Times, Warren said that the cryptocurrency industry offers “many of the same services” as shadow banks, but still lacks “consumer protections or financial stability that back up the traditional system.”
Warren expressed concerns over the rapidly growing market for stablecoins, a type of cryptocurrency whose value can be pegged to that of other assets, including fiat currencies like the U.S. dollar, the euro, or commodities like gold.
The senator said that it’s “worth considering” banning U.S. banks from holding the reserves to back private stablecoins, a move which “could effectively end the surging market.”
The total market capitalization of stablecoins like Tether (USDT) and USDC Coin (USDC) has surged parabolically this year, jumping from around $37 billion in January to $123 billion at the time of writing, according to data from Statista and CoinMarketCap. Large stablecoin accumulations have been widely perceived as an indicator of buying power for cryptocurrencies like Bitcoin (BTC) as fiat-pegged stablecoins enable a tool for traders to easily deposit on exchanges to buy and sell crypto.
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Warren's latest remarks come as global financial regulators pay more attention to stablecoins like USDT. According to online reports, the Ontario Securities Commission has recently banned USDT trading services by Canada’s first two registered crypto exchanges, Wealthsimple and Coinberry. In mid-July, U.S. Treasury Secretary Janet Yellen called on financial authorities to establish a proper regulatory framework for stablecoins.
