Warren to SEC Chair at Hearing: Regulators Need to Step Up to Address Cryptos Regulatory Gaps and Ensure an Inclusive Financial System | U.S. Senator Elizabeth Warren of Massachusetts
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washington, dc – at today’s senate banking, housing and urban affairs committee hearing, united states senator elizabeth warren (d-massachusetts) argued that high rates and Unpredictable events in crypto present severe risks to investors who have less money to lose.
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In response to your questions about fees on “decentralized” crypto exchanges and whether they present a path to greater financial inclusion, u.s. Gary Gensler, chairman of the Securities and Exchange Commission (SEC), told Sen. Warren that “it doesn’t look like the path” toward a more inclusive financial system and instead serves as a “highly speculative asset.”
Senator Warren concluded: “Regulators need to step up to address cryptocurrency regulatory gaps and make sure we’re really building the inclusive financial system we need. and Chairman Gensler, I hope you and the secretary take a leadership role in making this happen.”
transcription: us oversight. securities and exchange commission u.s. Senate banking, housing and urban affairs committee Tuesday, September 14, 2021
senator warren: thank you, mr. President. we hear a lot about how crypto is about financial inclusion, a way for people who don’t have a lot of money to manage or invest it. now, the banks have done a pretty lousy job of financial inclusion, so I want to test with you whether crypto is an improvement or not.
Last Tuesday, the cryptocurrency market plunged again. bitcoin and ether prices fell by roughly 10 percent, while a host of other tokens faltered by as much as a third. so, in a matter of hours, $400 billion in market value was gone. fagot! he just left! and in the meantime, several of the largest crypto exchanges had outages, preventing customers from making withdrawals or transactions.
So how did that affect people who don’t have a lot of money to lose?
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chairman gensler, let’s just say that last monday I took out the last sliver of my savings. I entered the crypto exchange currency base. i bought $100 worth of ether. Then I woke up early Tuesday morning, saw that the market seemed to be starting to tank, and thought, “I better sell right now.” but when i tried to sell, coinbase, the exchange went down.
so, president gensler, was there anything i could do to get my money?
chairman gensler: not in a federal agency because they haven’t registered with us yet even though they have dozens of tokens that may be securities.
senator warren: yes. Okay. so that sounds pretty risky to me. but let’s say instead of buying ether on coinbase last monday i decided to invest that $100 to buy some cool new token let’s call it “new coin” which was being hyped on twitter.
Now, the new coin is available only on a quote-unquote “decentralized” crypto exchange, so to buy it, I had to pay a fee, around $20, to the crypto miners who processed the transaction. It’s $20 to buy $100 worth of tokens, but I thought it was okay because twitter told me the new currency would make me a lot of money.
but then of course I woke up Tuesday morning and the market was crashing.
so let’s ask about this one. chairman gensler on tuesday when i wanted to sell new coins and quickly get back to dollars that exchange hadn’t closed but remember i had to pay $20 on monday to get into decentralized finance so how much would i have to pay to get out of defi on tuesday to sell my coins? Would I have had to pay a second fee of $20 or could I have had to pay even more?
chairman gensler: I don’t know because it would all be in the user agreement and by the way you put quotes around defi. I think that’s helpful because they really decentralized just one name. there’s a lot of user-to-user agreement. there is something you are doing with this platform. there is a governance token. there are usually some fees. but I don’t know what the particular rates would be.
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Senator Warren: Well, we actually know some of the fees from last Tuesday. the fee to switch between two crypto tokens on the ethereum network was over $500, obviously much more than the $100 he was trying to exchange in the first place. so my question is faced with these high and unpredictable fees, small investors could easily get sucked in and disappear altogether.
Chairman Gensler, Proponents say that crypto markets are all about financial inclusion, but the people who are most financially vulnerable are the ones most likely to have to withdraw their money faster when the market falls. Does this sound like the path to financial inclusion?
chair gensler: is a highly speculative asset class. doesn’t sound like the path you mentioned.
Senator Warren: You know, there’s a whole list of problems with crypto: unreliable technology, scams, devastating climate impact. But the high and unpredictable fees can make cryptocurrency trading really dangerous for people who are not rich.
Regulators need to step up to address cryptocurrency regulatory gaps and make sure we are truly building the inclusive financial system we need. and chairman gensler, i hope you and the secretary will take a leadership role in getting this done.
chairman gensler: thank you.
Senator Warren: Thank you.
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