Stablecoins Neither Decentralized nor Transparent: Senator Sherrod Brown

Well, that didn’t take long. The amicable tone among crypto company CEOs and lawmakers in Washington last week has today given way to more of the usual intense stablecoin scrutiny.

During a Senate Banking Committee hearing this morning, Chairman Sherrod Brown (D-OH) said stablecoins were neither decentralized nor transparent, warning “if you put your money in stablecoins, there’s no guarantee you’re going to get it back.”

Brown shared the full remarks from the Tuesday morning hearing on his website. The Ohio senator has been relentless in putting pressure on the companies that issue stablecoins, like Circle and Tether. 

Last month he sent a letter to exchanges and stablecoin issuers—including Coinbase, Gemini, Binance US and Paxos—to express his concerns and press them for details on how stablecoins can be redeemed for U.S. dollars.

The concern, at least about Tether, has been echoed in lawsuits and investigations. 

In September, a $1.4 trillion class action lawsuit against the company was dismissed. It alleged the company had issued unbacked USDT and fraudulently manipulated the price of Bitcoin in 2017. 

But there’s still a Justice Department investigation pending over bank fraud. And earlier this week, the USDT issuer was named in a new class action lawsuit claiming its practices are “immoral, unethical, oppressive, and unscrupulous,” according to the complaint, which was filed in the U.S. District Court for the Southern District of New York. 

Comments from other banking committee members this morning broke along what are becoming predictably partisan lines as Democrats continue to double and triple down on their distrust of cryptocurrencies. 

“They’re propping up one of the shadiest parts of the crypto world, DeFi, where consumers are least protected from getting scammed,” Sen. Elizabeth Warren (D-MA) wrote on Twitter after the hearing, including a clip from the hearing itself. “Our regulators need to get serious about clamping down before it is too late.”

Meanwhile, ranking member Sen. Patrick Toomey (R-PA) praised stablecoins, going on to say he hopes to see lawmakers pursue a regulatory framework that incorporates them and encourages innovation.

“Stablecoins offer tremendous potential benefits, including greater payment speed, lower payment costs, expanded access to the payment system, and programmability,” Toomey said. “Regulation of stablecoins should be narrowly tailored and harmonized within the United States and across jurisdictions globally.”