Sen. Elizabeth Warren (D-MA) has slammed the recently passed GENIUS Act, saying the American people will “pay the price” for the groundbreaking crypto legislation.
The act, which was signed into law by President Donald Trump earlier this month, provides legal clarity for stablecoins. It establishes a framework for issuing and trading stablecoins, which has prompted increased interest in them from banks and major retailers.
In an interview with Vanity Fair, Warren acknowledged the U.S. needs “strong crypto legislation,” but added that “jamming through industry-designed bills is a mistake.”
“But if we’re going to ratify a sweeping crypto regulatory framework, we need to get it right,” she said.
Warren went on to claim that crypto industry spending on lobbying “has blown through anything that Washington has seen before,” and lead to the industry being in a position to write “its own legislation.”
The senator tried to provide historical parallels to the GENIUS Act, recalling the buildup to the 2008 financial crisis.
“We’ve seen that movie before, when the industry writes its own legislation,” she said, this time referring to the traditional banking industry.
Warren compared the GENIUS Act to the Commodity Futures Modernization Act of 2000, a bill that meant over-the-counter (OTC) derivatives remained largely unregulated in the U.S.. Many analysts and commentators believe that OTC derivatives—such as credit default swaps based on U.S. home loans—were a major contributor to the 2008 financial crisis.
“That was in 2000, when the derivatives industry—this kind of small, out-to-the-side, esoteric financial product group—came to Washington and said, ‘Here’s a bill, please regulate us,’ and handed the legislators a bill that weakly regulated the industry and gave it the appearance of the US government’s backing.”
Warren said that when the US government “works for industries like this, a handful of people get really rich, and the American people pay the price.”
Some of Warren’s concerns echo those of economics professor Sergi Basco, who teaches at the University of Barcelona and recently shared his views on the GENIUS Act in an op-ed on The Conversation.
“One of the concerns I expressed in my note in The Conversation is very similar to what I think is behind the comments of Elizabeth Warren,” he told Decrypt. “By making a law, it gives stablecoins a presumption of safety.”
He reasoned that if people see “good firms” issuing stablecoins, they may assume all stablecoins are issued by firms of similarly good reputations.
“Also, it is not clear that the issuers of private stablecoins will be regulated enough to avoid potential bank runs,” he said. “In principle, the digital token will be backed by U.S. treasuries (or similar). However, the value of US treasuries fluctuates and having safe assets is not a guarantee to rule out bank runs like SVB demonstrated.”
He was referring to Silicon Valley Bank, which was shuttered in May 2023 in the midst of a bank run. The FDIC had to step in to ensure depositors would be able to withdraw their money.
Sen. Warren, who has long been critical of the crypto industry, also reiterated her criticism of Trump’s foray into the world of memecoins. During the same Vanity Fair interview, Warren also criticized Trump’s decision to disband the Department of Justice’s crypto enforcement unit and alleged he called on the SEC “to back off on crypto enforcement.”
The senator has been vocal in the past about how she believes that stablecoins could ultimately be abused by big business. In a statement shared with Decrypt earlier this month Warren said, “billionaires like Elon Musk, Jeff Bezos, and Mark Zuckerberg could launch stablecoins that track your purchases, exploit your data, and squeeze out competitors.”
