Senator Elizabeth Warren said, “DeFi is the most dangerous part of the crypto world.

US lawmakers claim that the value of stablecoins will “decline” with retail investors largely feeling the effects of a potential recession.

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Massachusetts Senator Elizabeth Warren has not abstained from criticizing decentralized funding and has expressed concern about how the steady decline in prices will affect ordinary investors.

During Tuesday’s Senate Banking Committee hearing on stablecoins, Warren asked Professor Hilary J. Allen of the College of Regulation at the American University of Washington whether operating stablecoins could be harmful to the US financial system. While Allen said that a “massive” buyback of stablecoins by people who lose trust in the token would likely not have “systemic consequences” for existing traditional markets, a DeFi system would be more likely to feel the effects.

Since stablecoins are “the lifeblood of the DeFi ecosystem” outside of regulated markets, Warren argues that their value will “decline where people need stability most,” with implications for traditional finance.

“DeFi is the most dangerous part of the crypto world,” said Warren.

“There is really no regulation here, and – no surprise – fraudsters and fraudsters and fraudsters mix part-time investors and non-profit companies here.” First trading in cryptocurrencies. In DeFi, someone cannot even say whether they are dealing with a terrorist. “

Allen added that the potential threat Warren poses could be in DeFi’s future if her complaint about illegal transactions is not addressed:

“I don’t think DeFi can thrive without stablecoins. I think it will fight. Right now, I think DeFi is constrained to an extent that it doesn’t affect financial stability, but as it grows, I think it’s a real threat, especially when it becomes intertwined with our traditional financial system. ”

The discussion among US lawmakers present at the hearing entitled Stablecoins: how do they work, how are they used and what are their risks?after committee chairman Sherrod Brown urged crypto companies to disclose information about consumer and investor protection of stablecoins. Professor Allen appeared at a testimony alongside Alexis Goldstein, director of financial policy at Open up Marketplaces, Jai Massari, partner at Davis Polk & Wardwell, and Dante Disparte, chief strategy officer and head of global policy head at Circle.

Related: Regulators are in the process of introducing stablecoins, but where should they start?

Warren has previously used hearings and public statements to claim that cryptocurrencies are primarily associated with illegal activity. During a June hearing on central bank digital currencies, the Massachusetts Senator said that “the crypto world currently has no consumer protection” and called many tokens “fake” investments. She has also criticized the high transaction fees of the Ethereum network in times of price volatility.