The Democrats of the Senate Banking Committee fear that their Republican colleagues are not taking the risks associated with crypto seriously. 

“Their whole caucus are believers in cryptocurrency,” said Sen. Sherrod Brown (D-OH), the chairman of the committee, in conversation with The Block. “Their whole caucus seems indifferent to the risk that cryptocurrency poses.”

“Unlike Republicans, we recognize that there is real risk to the system when billionaires are created out of — if we ask where the money comes from, these people making billions of dollars, they look at you blankly,” Brown continued, comparing the situation with the OTC derivatives market that led to the financial crisis of 2008.

Brown also said that the recent fall of TerraUSD’s peg “underscores the seriousness of this threat to the financial system, because it’s unregulated.”

Brown, as the head of the committee, sets the tone for a great deal of financial legislation. He is not alone; Senator Elizabeth Warren (S-MA), a noted critic of the crypto industry on the committee, told The Block:

“We have to deal with the risks that stablecoins pose to consumers and to our economy overall. If they are not adequately overseen and are representing that they have assets that in fact are not there, then that’s a risk to the whole financial system.”

“We do need a regulatory framework for stablecoins,” said Catherine Cortez Masto (D-NV) in a May 10 Banking Committee hearing. “The cryptocurrency market is now larger than the subprime mortgage market that triggered the global financial crisis.”

As to the solution, that remains up in the air. While Representative Josh Gottheimer (D-NJ) has drafted legislation that would essentially codify the Biden administration’s requested stablecoin policy in the House of Representatives, the Senate has seen no such proposals other than from Republicans. 

“I know that because of the cryptocurrency lobby here, we can’t pass any legislation. Doesn’t mean we’re not trying legislatively. But we can work with the SEC, the Fed, the FDIC, and the CFTC and the Ag Committee. And the OCC,” Brown said.

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