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Senior US Senator: Digital currencies are the new generation of illegal banks


A US senator has said that digital currencies are something like illegal banks. A staunch opponent of digital currencies, he says US banks should be barred from cooperating with stable coins.

to the Report The Block, Elizabeth Warren, a Democratic senator from Massachusetts and a longtime critic of digital currencies, said in a recent interview with the New York Times that she sees digital currencies as “a new generation of shadow banks.”

Shadow banks are non-bank financial institutions that provide services such as lending outside the scope of current banking regulations. Shadow banking is not illegal in itself, but some companies that follow this policy sometimes engage in illegal activities.

The New York Times report focuses more on BlockFi. Blockchain is a digital currency-based lending startup that has been privately funded and has attracted the attention of many US regulators. The US regulator has become increasingly sensitive to blockchain, largely due to the company’s extensive efforts to partner with other emerging digital currency startups that offer services similar to banking.

Warren’s comments show that he remains a staunch opponent of digital and industrial currencies built around active programs in the field.

The US senator told the New York Times:

Digital currency is the new generation of shadow banks. It offers a number of similar services but lacks the protection of consumer rights and financial stability that the traditional system supports. This is like turning straw into gold.

Warren also suggested that:

Banning US banks from holding funds deposited as financial backing for stable coins could effectively end this growing market.

Senator Warren recently began a separate conversation with Gary Gensler, chairman of the US Securities and Exchange Commission, as well as Janet Yellen, the Biden Treasury Secretary, through public correspondence.

In July, he wrote a letter to Yellen calling for “a coherent strategy to reduce the growing risks that digital currencies pose to the financial system.”

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