In the present time, regulators are doing a huge scramble over crypto to bring regulation. Due to these situations, Warren described crypto as “The New Shadow Bank”.
As all of us know very well that regulation on crypto is becoming a big task for the regulators. Even in the present time a big need for a regulatory framework is needed on the Defi platform. The regulators are doing a huge scramble over it.
According to a New York Times report, the entry of crypto in the banking system is resulting in a sudden change in Washington. Reports also claim that the regulators of the U.S are trying to scramble to catch up with the market that features lending and yield accounts ( e.g BlockFi).
Report revealed that regulators have big concern over the growth of crypto based banking platforms. And that can be a big problem for the traditional banking sector. The report talks about the BlockFi platform, which gained huge growth and users in a small time period and this clearly shows how these platforms are getting huge success with small access to technology.
So due to these things in the crypto market, Warren called it a shadow ban.
“Crypto is the new shadow bank. It provides many of the same services, but without the consumer protections or financial stability that back up the traditional system. It’s like spinning straw into gold.”
All the discussion ends up with the matter of the protection of the users’ Investment, by the various U.S. officials. And hopefully it cannot be easy because Gary Gensler, SEC chair, knows very well about the technology and crypto market, how this is growing and what are possible ways to make everything better through the restriction on non-crypto & crypto services.