“DeFi is the most dangerous part of the crypto world,” says Senator Elizabeth Warren

Massachusetts Senator Elizabeth Warren did not hold back in her criticism of decentralized funding, expressing concern about how a run on stablecoins would affect the average investor.

In a hearing Tuesday with the Senate Banking Committee on stablecoins, Warren said questioned Professor Hilary J. Allen of the American University’s Washington College of Law on whether a run on stablecoins could potentially endanger the US financial system. Although Allen said that a “massive” redemption of stablecoins from people who have lost trust in the tokens would not currently have “systemic consequences” for traditional markets, the DeFi system would be more likely to feel the effects.

Warren countered that since stablecoins were “the lifeblood of the DeFi ecosystem” outside of regulated markets, she believed that their value would “take a nosedive when people need stability most” with repercussions on traditional finance.

“DeFi is the most dangerous part of the crypto world,” said Warren. “There is practically no regulation here, and – no surprise – this is where the scammers and the scammers and the scammers mix among part-time investors and first-time crypto traders. In DeFi, someone cannot even say whether they are dealing with a terrorist. “

Allen added that the potential threat that Warren postulated could be in DeFi’s future without addressing their claim to illegal transactions:

“I don’t think DeFi can grow without stablecoins. I think it would fight. Right now I think DeFi is contained enough that it doesn’t affect financial stability, but if it grows, I think there is a real threat there, especially if it becomes intertwined with our traditional financial system. ”

The discussion among US lawmakers present at the hearing, titled Stablecoins: How Do They Work, How Are They Used, and What Are Their Risks ?, follows committee chairman Sherrod Brown Request to release crypto companies in connection with consumer and investor protection with stablecoins. Professor Allen appeared alongside Alexis Goldstein, director of financial policy at Open Markets, Jai Massari, partner at Davis Polk & Wardwell, and Dante Disparte, chief strategy officer and head of global policy at Circle.

Related: Regulators are coming for stablecoins, but where should they start?

Warren has previously used hearings and public statements to claim that cryptocurrencies are primarily linked to illegal activity. At a hearing in June Discussion about digital currencies from central banksthe Massachusetts Senator said the “crypto world currently has no consumer protection” and labeled many tokens as “bogus” investments. she also has criticized the high transaction fees of the Ethereum network in times of price volatility.

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