Senator Elizabeth Warren is sounding the alarm over what she sees as a dangerous loophole in new crypto legislation. As the House prepares to vote on the CLARITY bill next week, Lummis warns that its current language could allow major publicly traded companies like Meta or Tesla to sidestep decades of investor protections simply by tokenizing their assets.
In a Wednesday hearing of the Senate Banking Committee to address crypto market structure legislation, Senator Warren said that new crypto rules shouldn’t open a back door to destroy the securities laws.
In a statement, Warren said, “Think for just a minute about what that means. Under the House bill, a publicly-traded company like Meta or Tesla could simply decide to put its stock on the blockchain and POOF! it would escape all SEC regulation.”
This simply means that if these companies decided to turn their stocks into a crypto token and put it on blockchain under the CLARITY bill, it might no longer be subject to the SEC regulation like financial disclosures and investor protection. This could create a loophole that allows big companies to evade financial regulations by calling their stocks or assets “crypto tokens.”
Shut down the superhighway for presidential corruption
Warren has accused Trump of using his position to make billionaires richer. She asked Congress to shut down the president’s crypto corruption. This means prohibiting public officials, including the president, from issuing, sponsoring, or profiting from crypto tokens.
She said that Trump has already benefited from issuing his stablecoin, his memecoin, owning a Bitcoin mining company, and controlling a huge portfolio of crypto investments.
According to reports, the President and his associates pocketed more than $320 million alone from the $TRUMP memecoin, while most retail investors who bought that token lost money.
Also, Bloomberg reported that Trump had added at least $620 million to his portfolio in a matter of months due to his crypto investments. Lummis said, “ If we’re going to provide rules of the road for crypto, we need to shut down this superhighway for presidential corruption at the same time.”
Lummis asks for equal protection from scammers
Crypto investors should have the same protections from getting scammed or cheated as investors in any other asset. According to Warren, the protection shouldn’t be bigger, but it should be the same.
She gave an example of the rules prohibiting stock exchanges from simultaneously serving as brokers and giving preferential treatment to their own trades over their customers’ should be applied to the crypto market.
She also said that the law should ensure that turmoil in the crypto market doesn’t infect the traditional financial system. That means making sure that taxpayers are not on the hook for backstopping risky crypto bets.
There should be strong capital, liquidity, and risk management safeguards for crypto exchanges, crypto dealers, and other middle-market players so they can meet their obligations to customers and counterparties even when the market is unstable.
In addition, she asked that the law should counter the threat of illicit finance with commonsense rules to fight crime and protect our national security.
Crypto service providers that act as financial institutions must be required to implement anti-money laundering programs. She highlighted figures from the FBI that say that Americans lost more than $9 billion to crypto fraud last year. It was a 66% increase from the year prior.
She said, “Republicans refused to strengthen AML rules and close sanctions loopholes in the GENIUS Act and said they’d deal with it in a crypto market structure bill. So this is it. No more kicking the can down the road. Now is the time to solve that problem.”
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