Senator Elizabeth Warren has called on all federal regulators, in addition to the Securities and Exchange Commission (SEC), to rein in cryptocurrencies.
Warren recently spoke at an event hosted by the American Economic Liberties Project and Americans for Financial Reform. During the event, the Democratic Senator from Massachusetts gave her take on the crypto collapses of the past year.
“Good start” for SEC
The crypto skeptic Warren singled out FTX, Celsius and Voyager for “collapsing under the weight of their own fraud, deceit and gross mismanagement.” However, she lamented that, “when they sink, they take a lot of honest investors down with them.”
Nevertheless, Warren commended the SEC for making a “good start” over the past two years. By keeping Bitcoin exchange-traded funds out of the markets, she said the regulator prevented crypto volatility from affecting the traditional banking system. The crypto skeptic also praised the SEC for charging “crypto crooks” that had defrauded ordinary investors, referring to Sam Bankman-Fried.
All Hands on Deck
Yet, in spite of the SEC’s best efforts, Warren believes that effectively handling cryptocurrencies requires the government’s whole regulatory capacity. “All our regulators need to get in the game,” Warren said, which would also include environmental and banking officials.
Warren detailed some of the environmental costs of cryptocurrencies and the impact regulations could have. In addition to polluting communities, she said crypto mining operations have been straining power grids. This has driven up utility costs “in communities from Texas to New York,” she added.
According to Warren, the Department of Energy and the Environmental Protection Agency are already empowered to demand disclosures from these miners. These disclosures, if as damning as Warren imagines, could make things quite uncomfortable for these mining companies.
Although the SEC has well-insulated the banking system thus far, the Senate Banking Committee member said that crypto-friendly banks pose an increasing risk. Although more banks have started offering crypto services, Warren emphasized, “it’s the bank regulators’ job to insulate the banking system.”
EU Affirms Basel Accords
Lawmakers in the European Union obviously share the same sentiment given the legislation they passed earlier this week. The European Parliament’s economic affairs committee approved the final implementation of the Basel III accords. This international regulation sets capital requirements for banks, among other things.
The amendment recently passed will require banks in the EU to fully back any crypto asset holdings. Critics are concerned that crypto assets are not well-defined, which could provide the opportunity for legal overreach.
Proponents believe that such prohibitive capital requirements will help prevent instability in the crypto world from spilling over into the financial system. The new provisions are scheduled to enter into force in Jan. 2025.
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