Are cryptocurrencies any good? The US Senate doesn’t think so

Summary

  • Warren heavily criticized cryptocurrencies
  • Sherrod Brown spoke favorably about the underlying blockchain technology
  • Elizabeth Warren has written a letter to Janet Yellen for regulating cryptos

The Senate committee conducted a hearing on July 27 to discuss cryptocurrencies. The Committee on Banking discussed the pros and cons. The hearing was titled ‘Cryptocurrencies: What are they good for?’

Wide criticism, some optimism

Like always, Senator Elizabeth Warren criticized the growth of cryptocurrencies. Warren warned against allowing ‘shadowy’ and ‘faceless’ coders to take over the country’s financial system.

A few Senators, however, also spoke in favor of blockchain-tech based cryptos. Senator Cynthia Lummis was of the view that the transparent nature of open source finance can lead to more Americans becoming part of the financial system. One more lawmaker, Senator Sherrod Brown was supportive of blockchain technology that underpins the entire cryptocurrency world.

One of the participants, Professor Angela Walch highlighted concentration of power. She was of the view that policy actions are necessary to address this imbalance. Walch also shone the spotlight on how some miners and developers can wield excessive power at the expense of other stakeholders in crypto space. Warren warned against believing everything that crypto proponents assert.

Another key point of discussion was systemic risk of cryptocurrencies.

Senators and other participants debated whether issues of the crypto space can make way into traditional financial system of the US.

In this regard, Jerry Brito of Coin Center, a non-profit organization, assuaged fears invoking some recent statements of Fed officials. Presidents of two Federal Reserve banks have in the past rebuffed concerns about cryptos posing any systemic risk. Brito was of the view that cryptocurrencies have yet to achieve that scale where they can become a systemic concern.

He also termed cryptos ‘commodities’.

Warren’s letter to Treasury Secretary

The hearing came in the backdrop of a letter sent by Senator Elizabeth Warren to Janet Yellen. Warren in her letter urged the Treasury Secretary to address risks posed by cryptos.

Sounding very critical of the growing threat of cryptocurrencies, Warren advised devising a framework for regulation with sufficient powers to regulatory agencies. She asked the Financial Stability Oversight Council, the federal body tasked with identifying financial risks and led by Yellen, to make crypto market ‘safer’. Warren highlighted that unregulated crypto space is a risk facing consumers as well as country’s financial landscape.

From decentralized finance to stablecoins and cyberattacks to banking risks, Warren covered many points in her letter.

Copyright © 2021 Kalkine Media

Bitcoin’s recent rally

Even in the light of growing criticism and crackdown, cryptocurrencies are faring well. Bitcoin, the most popular crypto, has regained some lost ground after the news of Amazon contemplating accepting cryptos as payments broke. Bitcoin reclaimed US$40,000 mark before falling again on negative sentiments.

The report about Amazon was quickly followed by the e-commerce giant’s denial that it may accept bitcoin by the end of 2021. Nevertheless, bitcoin gained over 14 per cent on the back of this report. In a separate scene, Tesla’s Elon Musk has said that the electric car maker may soon restart accepting bitcoin.

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