Senator Warren: <i>CLAЯITY Act</i> Significantly Loosens Crypto Asset Restrictions, Increases Financial Stability Risk

BlockBeats News, May 14th - Democratic Senator Elizabeth Warren stated during the Banking Committee hearing on the "CLARITY Act" that the law should protect safety and soundness by limiting the types of assets banks can hold and the activities they can engage in. Traditionally, there have been many assets and activities that banks are prohibited from participating in, but this bill significantly relaxes restrictions on crypto assets. For example, the bill allows banks to transact with decentralized finance platforms that face almost weekly runs or implosions and permits banks to hold crypto assets on their balance sheets. More critically, the bill allows bank holding companies to buy and sell digital assets for any investment or trading purpose, including risky proprietary trading and hedge fund activities—precisely the kind of activities that led to the 2008 financial crisis. If the next crypto collapse triggers a banking collapse, innocent businesses and households unfamiliar with blockchain will also suffer losses. Therefore, Warren has proposed an amendment to remove these risky provisions from the bill.

The "Crypto Market Structure Act" (aka the CLARITY Act) is currently undergoing a line-by-line amendment voting debate.