- Senator Sherrod Brown stated in a Senate Banking Committee hearing that stablecoins are neither decentralized nor transparent.
- He further warned investors that they could lose all of their money in stablecoins.
- Senator Patrick Toomey urged for a more inclusive regulatory framework for stablecoins that encourages innovation.
United States Senator Sherrod Brown (D-OH) heavily criticized stablecoins during a hearing held by the US Senate’s Banking, Housing and Urban Affairs Committee. He warned that the digital coins are neither decentralized nor transparent and that investors could easily lose money.
Democrats continue to double down on stablecoins
Last month, Brown sent a letter to stablecoin issuers and cryptocurrency exchanges to express his concerns on the new asset class and requested details on how stablecoins could be redeemed for fiat money.
During the hearing, the senator claimed that stablecoins only mirror the existing banking system without following any regulations. He further stated that investors could end up losing all of the funds. He added, “if you put your money in stablecoin, there is no guarantee that you are going to get it back.”
He refers to digital tokens as a “wild financial speculation,” and that the technology behind stablecoins, blockchain, will never “democratize money,” nor “build a more inclusive economy.”
Brown stated that stablecoins are neither decentralized nor transparent and that critical information about the backing of the tokens is not always made available to their buyers.
This comment comes at a time where there was another class-action lawsuit filed against Tether, accusing the firm of misrepresenting crucial information about the stablecoin USDT.
Adding onto the Ohio senator’s concerns, Senator Elizabeth Warren (D-MA) said that stablecoins are “propping up one of the shadiest parts of the crypto world, decentralized finance (DeFi), where consumers are least protected from being scammed. She urged for a clampdown on the digital tokens from the country’s regulators.
Senator Patrick Toomey, (R-PA) added that new regulations around stablecoins should be introduced to address consumer protection and risks in the financial sector. The senator added that legislation should be designed to promote innovation in the global digital economy.
Senator Toomey reiterated some of the benefits that stablecoins offer, including more efficient payment speed, lower transaction costs, greater access to the payment system and programmability. He urged for “narrowly tailored and harmonized regulation of stablecoins in the US and across jurisdictions globally.”