Senator Warren criticizes 'inadequate regulation of crypto assets'… warns of conflicts of interest involving Trump and financial risks

Senator Elizabeth Warren, the ranking Democrat on the Senate Banking Committee, strongly criticized the new stablecoin bill, the "Guiding and Establishing Innovation for U.S. Stablecoins Act (GENIUS)." Senator Warren urged the Treasury Department to address conflicts of interest tied to former President Trump and financial stability risks in the bill's implementation process.

In a letter sent on the 21st (local time) to Treasury Secretary Scott Bessent, Warren stressed, "The Treasury must fully implement the law to protect America's financial stability and consumers, taxpayers, and national security." The bill was enacted in July with former President Trump's signature and requires stablecoin issuers to maintain 100% reserves in U.S. dollars or similar liquid assets. It mandates annual audits for issuers with market capitalizations of USD 50 billion or more and establishes guidelines for foreign issuance.

Warren argued that broader crypto market regulatory legislation currently being discussed in Congress should play a key role in plugging the GENIUS Act's gaps. She said, "The Treasury has an opportunity, through bipartisan consultation, to propose concrete measures to address these risks." On that day, the Senate and the House planned separate meetings with crypto industry representatives held by Democrats and Republicans, respectively, to discuss an overall regulatory framework for the crypto industry.

Warren's concerns align with remarks by Federal Reserve Board Governor Michael Barr. Barr recently said the GENIUS Act leaves regulatory gaps and urged federal financial regulators and state authorities to cooperate in formulating rules to protect the financial system.

Warren specifically raised concerns about former President Trump's involvement in crypto businesses. Democrats are alarmed that the "World Liberty Financial USD" run by the Trump family has grown into one of the world's largest stablecoins. She urged, "The Treasury should present concrete solutions to these corruption issues and establish clear standards to prevent conflicts of interest."

Warren also emphasized that the Treasury must present concrete measures to prevent illicit financing and consumer harm. She noted, "The GENIUS Act lacks safeguards to prevent scenarios in which stablecoins could shock the entire financial system."

Warren cited the recent Paxos issuance error as an example. Paxos mistakenly issued some 300 trillion units of the PayPal stablecoin (PYUSD) due to a technical error and immediately burned them, but Warren called it "an example showing how operational failures pose serious risks to issuers and market stability." She added, "The Treasury must clearly explain to the public how it will manage these risks and what legislation is needed if it lacks the necessary authority."