Senator Elizabeth Warren, who sits on the Senate’s banking and finance committee, is not known for her love of crypto, and indeed is better known for her push for tighter regulations on cryptocurrencies. So, it was something of a surprise when she made a statement on Wednesday of this week, saying that digital currencies, and in particular those issued by central banks, could assist unbanked, low-income Americans. She pointed out that this group has long been denied access to bank accounts in the mainstream banking system.
So, is this a signal that support for cryptocurrencies is picking up in Washington D.C.?
When Warren spoke to CNBC’s Squawk Box, she said, cryptocurrencies and central bank digital currencies “may be an answer” to the “enormous failure by the big banks to reach consumers.”
She also pointed out that digital currencies have “extremely low transaction costs,” and that this could make them an ideal way to include the 15 million Americans without bank accounts in the financial system. Warren also highlighted a fact that is well known to those working with the financially underserved: they have to pay intermediaries to cash their pay cheques or to pay bills. Access to a digital currency could change all that for these people and give them back full control of their money.
When asked about her objections to crypto, Warren replied that her concerns focused on “bad actors” rather than cryptocurrencies per se, saying that in her view a “wholly unregulated market” has allowed “big guys to take advantage . . . of small investors and taxpayers.”
The sentiments Warren expressed this week are significantly different to her thoughts expressed in a letter to Janet Yellen, the Treasury Secretary, in which she urged Yellen to lead “a coordinated and cohesive regulatory strategy” to help mitigate the “growing risks” cryptocurrencies pose to the financial market.
Before we get too excited about what appears to be a change of direction on Warren’s part, it is probably best to reserve judgement until we see the Fed’s highly anticipated report on central bank digital currencies, which is due to be released in early September. Fed Chair Jerome Powell has already insisted the Fed isn’t rushing into the space, but he has suggested that a digital US currency could make all other cryptocurrencies obsolete. He said, “You wouldn’t need stablecoins, you wouldn’t need cryptocurrencies if you had a digital U.S. currency. I think that’s one of the stronger arguments in its favour.” That’s quite a big claim that smacks just a bit of American exceptionalism.
Meanwhile the Bank of America is reconciled to digital currencies, and sent out a note to its clients this week saying:
“Digital currencies—either issued by central banks or privately issued with safe, liquid backing—seem inevitable.” It added that central banks in particular “have the power and the will to prevent a very bad outcome in terms of collateral damage in the financial system.”
In the end, that is their real concern. Make of it what you will.