Elizabeth Warren Says Crypto Services ‘Turns Straw To Gold’ – And Blows Them Up As New Shadow Banks | Currency News | Financial and business news

• Cryptocurrency services “are turning straw into gold,” Senator Elizabeth Warren told The New York Times.
• They provide many of the same services as shadow banks, but without consumer protection, the Massachusetts Democrat said.
• Warren brought up the idea of ​​banning US banks from holding cash deposits to back up stablecoins.
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Senator Elizabeth Warren told the New York Times that cryptocurrency services were “turning straw into gold,” as she criticized the way they operate outside of financial industry rules.

“Crypto is the new shadow bank,” she said, quoted in a report released on Sunday. “It provides many of the same services, but without the consumer protections or financial stability that underpin the traditional system. “

“It’s like spinning straw into gold,” Warren added.

Shadow banking refers to transaction-based activities that take place outside the traditional banking sector, and therefore outside the realm of regulatory oversight. The system was a factor in the 2007-08 subprime mortgage crisis which led to the global financial crisis.

Warren’s comments appeared in an article about the ambitions of BlockFi, a New Jersey-based crypto startup, to serve crypto enthusiasts the same way a Wall Street company serves traditional financial clients.

The Democratic senator from Massachusetts also raised the possibility of banning US banks from holding cash deposits protecting stablecoins – an option that could “effectively end the surge in the market.”

Warren has taken an anti-crypto stance for some time now, and she called on Treasury Secretary Janet Yellen to introduce tougher rules for related industries. The main concern of lawmakers is that retail investors could be harmed in volatile and unregulated markets like those for crypto assets.

“Our financial system has been exposed in many ways to these assets to such an extent that material distress in the cryptocurrency market could spread throughout the financial sector,” she wrote in a July letter to Yellen.

Gary Gensler, chairman of the Securities and Exchange Commission, has taken a more open approach to cryptocurrencies. But he said they can only become mainstream if regulators set clear rules around the industry. Gensler says he is neutral, if not intrigued, by the technology on which cryptocurrencies work, but is not neutral about investor protection.

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