Bobos & Wojaks

Get rich or die tryin

DeFi Is the Most Dangerous Part of Crypto, Says US Senator


Senator Elizabeth Warren of the United States has called on regulators to crack down on decentralized finance (defi) and stablecoins. “before it’s too late.” She said: “Defi is the most dangerous part of the crypto world … it’s where the scammers, the cheats, and the swindlers mix among the part-time investors and first-time crypto traders.”


During a Senate Banking, Housing, and Urban Affairs Committee hearing on Wednesday, U.S. Senator Elizabeth Warren (D-Mass.) urged regulators to “clamp down” on stablecoins and decentralized finance (defi) platforms “before it is too late.”

She mentioned the stablecoins tether (USDT) and usd coin (USDC). In answer to Senator Warren, Alexis Goldstein, director of financial policy at the Open Markets Institute, emphasised that stablecoins are a type of cryptocurrency.“may not always be backed one-to-one … as the assets backing those tokens are often not real dollars.”

According to Tether’s own assessment, “just approximately 10% of the assets underpinning the stablecoin are genuine cash in the bank.” “90% is something else — not actual money.”

Furthermore, she emphasised that the report “is not truly validated by a complete audited financial statement or by any government body.”


“It’s worse than that,” Warren said, stressing that “stablecoins are not always stable.” In difficult economic circumstances, people are more prone to withdraw from dangerous financial goods and invest in actual currencies. Stablecoins will plummet precisely when people need stability the most, and that run-on-the-bank mentality might eventually wreck our entire economy.” The senator elaborated:

“Defi is the most dangerous part of the crypto world. This is where the regulation is effectively absent and — no surprise — it’s where the scammers, the cheats and the swindlers mix among the part-time investors and first-time cryptotraders. Shoot, in Defi someone can’t even tell if they are dealing with a terrorist.”

She went on to say: “Stablecoins provide the lifeblood of the Defi ecosystem. In Defi, people need stablecoins to trade between different coins, to trade derivatives, to lend and borrow money – all outside the regulated banking system. Without stablecoins, Defi comes to a halt.”

During the session, Hilary Allen, an American University College of Law professor, answered concerns about whether stablecoins are a threat to the US financial system. “Does Defi pose a threat to our financial stability?” Warren questioned the professor. Is it possible for Defi to grow without stablecoins?”

Allen responded: “I don’t think Defi can grow without stablecoins. I think it would struggle. Right now, I think Defi is contained to the point where it won’t impact financial stability, but if it grows, I think there’s a real threat there. Particularly if it becomes intertwined with our traditional financial system, and there is industry interest in pursuing this integration on both the traditional finance and the crypto side. So, I think it’s critical that stablecoins not allowed to fuel that growth.”

“Stablecoins have no regulators, independent auditors, guarantors, nothing,” he says. Senator Warren concluded: “And they’re supporting one of the shadiest aspects of the crypto world — the area where consumers are least protected from being defrauded.”

This is a threat to our economy and traders. Before everything explodes up, now is the time to act. Before it’s too late, our regulators must get serious about reducing these hazards.