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The Massachusetts senator believes it is “worth considering” prohibiting US banks from maintaining reserves to back private stablecoins.
United States Senator Elizabeth Warren, one of the most outspoken cryptocurrency critics in the United States government, has dubbed the cryptocurrency business the “new shadow bank.”
In a Sunday 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 that “could effectively end the surging market.”
According to Statista and CoinMarketCap data, the total market value of stablecoins such as Tether (USDT) and USDC Coin (USDC) has risen dramatically this year, rising from about $37 billion in January to $123 billion at the time of writing. Large stablecoin accumulations are often regarded as an indicator of purchasing power for cryptocurrencies such as Bitcoin (BTC), as fiat-pegged stablecoins enable traders to quickly deposit on exchanges to buy and sell crypto.
Warren’s latest comments come as global financial regulators pay closer attention to stablecoins such as 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.