Elizabeth Warren's next clash with the crypto industry could put companies and regulators under serious pressure, even without any change to the law.
With Democrats taking control of the Senate, Warren is expected to chair the Senate Banking Committee in January, giving her greater influence over its hearings and investigations.
She has already requested crypto companies' bank applications, records on trading safeguards, and explanations of government decisions involving the president's family. Executives and officials could soon be called on to defend those decisions publicly, and regulators could act if the evidence warrants it.
Much of the debate over crypto regulation is about what Congress will let companies do next. Warren's requests focus on decisions companies and regulators have already made, and whether the records support their explanations.
Passing a new law would require support in both chambers of Congress. As chair, Warren could use the committee's oversight powers to scrutinize approvals and licenses regulators have already issued.
If she becomes chair, regulators will retain the power to suspend or revoke the licenses they issue. Warren could keep an inquiry going by scheduling hearings and requesting records under the committee's rules.
That could involve asking officials who approved a company's plans what they knew at the time and why they signed off.
Some inquiries end after an exchange of letters, but Warren could continue seeking records and testimony long after the first responses arrive.
Companies that thought the hard part was over once their licenses were approved could spend months paying lawyers to review old records and preparing executives to defend decisions they believed were settled.
Congratulations on the charter. Now show your work.
Coinbase announced final approval for its national trust company on Nov. 9, three days after the charter took effect. The Office of the Comptroller of the Currency (OCC), the federal agency that oversees national banks, now supervises its new custody business.
Custody means safeguarding customers' assets, and it is a lucrative business. If you run an investment fund that holds crypto for clients, both your customers and regulators want to know how the assets are protected and who checks that the safeguards work.
Coinbase says federal supervision gives its custody business a more consistent set of rules.
Warren wants to know how the OCC determined which companies qualified for those charters. In a May letter to the agency, she requested applications and legal analyses for nine charter decisions involving crypto companies, including Coinbase, as well as records on pending applications.
She also requested confidential exhibits and communications about the charters involving the White House or the president's family, and gave the agency until June 1 to respond.
Warren argued that some companies had been allowed to conduct “bank-like activities” while taking on fewer obligations than conventional banks. The OCC has its own interpretation of the law, and assessing Warren's argument requires examining what the agency allowed each company to do.
Trust banks can safeguard assets, while conventional banks typically accept deposits and make loans. Coinbase's charter authorizes it to hold crypto in custody and imposes legal duties toward the customers whose assets it holds.
The company must operate within the scope of that approval and involve the OCC if it wants to make major changes to its business.
Ripple's approval covers custody and management of stablecoin reserves, while its New York-regulated subsidiary continues to issue RLUSD. Both companies hold trust charters, but the terms of each approval specify which services the company can offer and under what conditions.
With those records, Congress can compare the services a company described in its application with the services it offers. Senators can ask officials to explain the legal basis for an unusual approval, and communications can help establish who was involved and what role they played.
Federal supervision gives Coinbase a legal basis for offering custody and gives the OCC conditions it can enforce. Warren can focus on that specific decision, asking the officials who approved the charter how they applied the law and what safeguards they required.
Warren can make a license uncomfortable
A request Warren made in September shows the difference between her current role and a chairmanship. She and other Senate Banking Committee Democrats asked Chair Tim Scott to hold a public hearing on prediction markets, citing risks that included contracts tied to corporate performance.
If Warren becomes chair, she will have more influence over whether the committee holds a hearing on those contracts and whom it invites to testify.
In prediction markets, people trade contracts that pay out according to the outcome of an event, such as an election. Prices can offer a public forecast because they reflect what traders know and expect, but someone with confidential information can trade on it before others find out.
In an Oct. 28 letter to Kalshi and Polymarket, Warren and Republican Sen. John Curtis asked how the platforms police election markets. They gave the companies until Nov. 3 to report how often they blocked prohibited trades before they occurred and how often they detected them afterward.
When a platform says it caught someone breaking the rules, senators can ask how long the person was able to trade before the company intervened. They can also ask how the platform searches for similar trades that its systems may have missed.
Kalshi has published accounts of three candidates trading on their own races, describing its investigations and exchange-level penalties. The disclosures are evidence that it does take enforcement action, but they do not provide the full set of statistics requested in the October letter.
Warren and Sen. Jeff Merkley pursued a related issue in a Nov. 9 letter to White House Counsel Will Scharf, asking about the administration's response to a former presidential aide's prediction-market trading case and safeguards for nonpublic information.
They requested answers by Nov. 23. The inquiry also focuses on the government employer responsible for protecting information an employee could exploit.
There are limits to how far Warren could pursue these issues and how much pressure she could put on companies such as Coinbase and Kalshi. The Senate Agriculture Committee oversees the CFTC, the federal derivatives regulator, while the Senate Banking Committee's responsibilities include banks and securities markets.
An inquiry by the Senate Banking Committee would therefore need to fall within its authority, and becoming its chair would not give Warren personal control over every agency connected to crypto.
The Senate Banking Committee can compel someone to testify by issuing a subpoena, a formal order to appear. Under current rules, the committee or subcommittee chair can issue one if the panel's top senator from the minority party agrees.
The panel can also approve a subpoena by majority vote, and Senate rules give committees the power to demand documents. The Banking Committee will adopt its rules for the next Congress when it reorganizes.
The paperwork has to lead somewhere
Internal records made public at a Senate hearing can conflict with a company's public statements. Regulators can review those records and decide whether they have grounds to investigate under existing law, while lawmakers can use the same evidence to argue for new legislation.
In March, Warren asked Commerce Secretary Howard Lutnick how his department had assessed the security risks posed by Bitmain, a Chinese manufacturer of Bitcoin mining machines. She also asked whether Bitmain's ties to American Bitcoin, a mining company co-founded by Eric Trump, had influenced the department's decisions.
If the government restricted Bitmain equipment, the agency imposing the restriction would need legal authority to do so. The scope of any restrictions would determine the costs for US miners that rely on Bitmain.
Restrictions on new machines could delay deliveries, while limits on spare parts could make it more costly to keep existing machines running.
Companies can challenge demands they consider too broad, while legal privilege or confidentiality can limit what Congress can obtain or make public.
If a company refuses to comply with a subpoena, enforcement can require another vote or a court fight, as described in the Congressional Oversight Manual. Any regulatory fine or decision to revoke a charter would still have to come from an agency with the authority to act.
Long before an enforcement case begins, an inquiry can occupy lawyers and executives as they gather records and prepare responses.
If senators examine a company's public assurances about safety or regulatory approval at a hearing, executives may also have to explain those assurances to customers.
The records could also support the original decision by showing that regulators identified the risks and required safeguards before granting approval.
If Warren becomes chair of the Senate Banking Committee, she will have more influence over which decisions the committee examines and whom it asks to testify. Her existing requests offer some indication of where she might begin.
Crypto executives and the officials who approved their plans could find themselves publicly explaining what they knew when they signed off and why they considered the safeguards sufficient.
