Senator Warren: The CLARITY Act significantly relaxes restrictions on crypto assets, increasing the risk of a financial crisis

BlockBeats News, May 14 — During a hearing of the Senate Banking Committee on the CLARITY Act, Democratic Senator Elizabeth Warren said that laws should ensure safety and stability by restricting the types of assets banks can hold and the activities they can carry out. Traditionally, a large number of assets and activities are prohibited for banks, but this bill substantially loosens restrictions on cryptocurrencies. For example, the bill allows banks to trade with decentralized finance platforms that nearly every week face bank runs or collapse in the form of an implosion, and it also allows banks to hold crypto assets as positions. More importantly, the bill allows bank holding companies to buy and sell digital assets for any investment or trading purpose, including dangerous proprietary trading and hedge fund activities—activities that are exactly what led to the financial crisis in 2008. If the next crypto crash triggers a bank collapse at the same time, innocent businesses and families that have never heard of blockchain will also suffer losses. Therefore, Warren proposed an amendment requiring the removal of these dangerous provisions from the bill.

The Crypto Market Structure Act (i.e., the CLARITY Act) is currently debating and voting on the amendment, clause by clause.