Central bank digital currency (CBDC) has great promise, influential US Senator Elizabeth Warren stated at a US Senate’s Banking Committee hearing.
Speaking at the hearing on Wednesday, she also urged her fellow lawmakers to move “head-on” and address the cryptocurrency issues.
“Legitimate digital public money could help drive out bogus digital private money while improving financial inclusion, efficiency, and the safety of our financial system,” Senator Warren said.
She also stated that “cryptocurrencies have turned out to be a fourth-rate alternative to real currency”.
However, traders didn’t mind her comments and bitcoin bounced back on Wednesday, climbing as high as $37,500 in late-night trading after falling under $32,000 on Tuesday.
On Thursday morning, the world’s leading digital currency was trading at around $36,700, up 9.3% over the last 24 hours (as of 6:20 UTC).
All that’s wrong with crypto
“Crypto’s promises haven’t come to pass,” Senator Warren said in her statement. “Meanwhile, cryptocurrency has created opportunities to scam investors, assist criminals, and worsen the climate crisis.
"The threats posed by crypto show that Congress and federal regulators can’t continue to hide out, hoping that crypto will go away. It won’t. It’s time to confront these issues head-on.”
Cryptocurrencies’ promises to solve the problems in our banking system haven’t come to pass, but Congress and federal regulators can’t hide out and hope crypto will go away. It won’t. It’s time to confront these issues head on. pic.twitter.com/DaYUhM8Z7o— Elizabeth Warren (@SenWarren) June 9, 2021
The Democrat Senator highlighted in her speech “what’s happening in the real world with cryptocurrencies”:
“First, cryptocurrencies are a lousy way to buy and sell things. Unlike the dollar, their value fluctuates wildly depending on the whims of speculative day traders,” she said.
“Second, crypto is a lousy investment. Unlike, say, the stock market, the crypto world currently has no consumer protection – none. As a result, honest investors and people trying to put aside some savings are at the mercy of fraudsters.
“Third, crypto has become a haven for illegal activity. Online theft, drug trafficking, ransom attacks, and other illegal activity have all been made easier with crypto.”
She added: “Finally, there are the environmental costs of crypto. Many cryptocurrencies are created through 'proof-of-work' mining that involves using computers to solve useless mathematical puzzles in exchange for newly minted cryptocurrency tokens. Such mining has devastating consequences for the climate.”
States mount pressure on cryptocurrencies
Governments have increased their pressure on cryptocurrencies in recent months as the hype around digital assets has also increased. The high fluctuations in cryptocurrency prices are one of the things that legislators and regulators mention most frequently when talking about the need to regulate this market or ban it altogether.
China recently toughened its regulations against crypto mining and trading. On Wednesday, China's Qinghai became at least the third province in the nation taking steps to curb cryptocurrency mining operations due to environmental concerns, barring local officials from setting up or permitting crypto-mining projects, Forbes reported.
At the same time, popular Chinese Internet companies started censoring searches for some of the largest crypto exchanges.
Moreover, the Chinese Police said it arrested more than 1,100 people suspected of using cryptocurrencies to launder illegal proceeds from telephone and Internet scams.
Negative news weighs on crypto market
Although bitcoin’s bounce-back on Wednesday may suggest that the recent bad news hasn’t affected the crypto market, the negative effects have been strong. Bitcoin’s price is currently about 42% lower than the all-time high reached in mid-April while the other crypto coins have taken even bigger hits.
Ethereum and other top cryptos haven’t joined bitcoin’s recovery on Wednesday. Ethereum was up only 1% in the last 24 hours and is now more than 40% under its all-time high in mid-May. Binance Coin (BNB), which is connected to the world’s leading cryptocurrency exchange, is down almost 50% since mid-May.
However, most of the top cryptocurrencies are still trading higher than at the end of last year.