Elizabeth Warren Rails Against Stablecoin Bill, Warns It Would Enable 'Trump's Egregious Corruption'

Forbes Breaking News

During remarks on the Senate floor Monday, Sen. Elizabeth Warren (D-MA) spoke in opposition to the GENIUS Act.

Transcript

00:00Senator from Massachusetts.

00:01Mr. President, I rise today to talk about the Genius Act.

00:06Analysts expect that passing the Genius Act could grow the stable coin market tenfold

00:12over just the next three years.

00:14That would take a $200 billion market to a $2 trillion market,

00:21making it just a little bit smaller than the entire GDP of Canada.

00:26Two weeks ago, Democrats refused to vote for the bill because it had inadequate safeguards for consumers

00:33and it posed too much risk, both for our financial stability and our national security.

00:40Democrats also voted no because the bill failed to address President Trump's blatant crypto corruption.

00:49So, here we are again.

00:51What has changed in the bill since the last vote?

00:54The answer? Not much.

00:57Its basic flaws remain unaddressed.

01:01While a strong, stable coin bill is the best possible outcome,

01:06this weak bill is worse than no bill at all.

01:11First, corruption.

01:13It is fitting that we are voting on the Genius Act just a few days

01:17before President Trump hosts a, quote,

01:21private intimate dinner and a VIP White House tour for the top investors in his meme coin,

01:30many of whom remain anonymous.

01:33Buyers, including some apparently foreign investors,

01:38reportedly spent an estimated $148 million in the contest,

01:44enriching Donald Trump and his family.

01:47And yet, this pay-to-play scheme is only the tip of the iceberg of the president's crypto corruption.

01:57Trump and his family have already pocketed hundreds of millions of dollars from his crypto ventures,

02:03and they stand to make hundreds of millions more from his stable coin, USD1, if this bill passes.

02:12It launched only weeks ago, but USD1 is already the fifth largest stable coin in the entire world.

02:21Passing this bill means that we can expect more anonymous buyers,

02:26big companies, and foreign governments to use the president's stable coin

02:32as both a shadowy bank account shielded from government oversight

02:37and as a way to pay off the president personally.

02:42For crooks, it is a two-for-one.

02:45This is not a hypothetical problem.

02:48Already, an Abu Dhabi investment firm called MGX

02:53is using Trump's stable coin to finance a $2 billion investment

02:59in the Binance cryptocurrency exchange,

03:03essentially just cutting Trump in on the deal of this enormous financial transaction.

03:11MGH is chaired by the intelligence chief of the United Arab Emirates

03:16and co-owned by a firm with extensive ties to the Chinese government.

03:23If Congress passes this bill, USD won't just be a coercive tool

03:29to pay off a corrupt president.

03:31It will be a financial instrument blessed by the United States government.

03:37And this bill provides even more opportunities

03:40to reward buyers of Trump's coins

03:43with favors like tariff exemptions, pardons, and government appointments.

03:50For months, many Democrats have pushed for common-sense ethics provisions in this bill.

03:57Unfortunately, the final bill does nothing, nothing,

04:02to rein in the president's crypto corruption.

04:05But some supporters say,

04:07well, that's because the corruption's already happening,

04:09and at least this bill won't make it any worse.

04:12That is wrong.

04:13The Genius Act will accelerate Trump's corruption

04:17by supercharging the size of the stablecoin market

04:21and the reach and profitability of Trump's USD-1.

04:27And for the first time in American history,

04:32this bill will make our president, Donald Trump,

04:35the regulator of his own financial product.

04:39This Congress should be a check on the president.

04:44Congress should not be making it even easier

04:46for him to line his pockets with even more shady crypto cash.

04:51If Congress does not fix this issue here today,

04:57then it will be aiding and abetting his corruption

05:00every time President Trump's stablecoin

05:04is used to finance a corrupt deal.

05:07Second problem, financial stability.

05:12I am deeply concerned that this bill

05:15will directly lead to the next financial meltdown.

05:18This is not the first time

05:19that Congress has listened to the financial industry

05:22and created a weak regulatory regime

05:26for a new innovative financial product.

05:29We have seen this story before,

05:31and we know how it ends.

05:3325 years ago,

05:35Congress passed the Commodity Futures Modernization Act

05:38to support the obscure financial derivatives market.

05:43And almost nobody noticed.

05:44At the time,

05:46derivatives were a relatively niche financial product.

05:49Most people really didn't understand

05:51what they were or what they did.

05:54But when the derivatives industry came knocking,

05:58begging for so-called regulation,

06:01Congress was willing to oblige.

06:03After all,

06:05people said,

06:06surely some kind of regulatory framework

06:09was better than nothing.

06:11So, Congress created a weak set of rules

06:13that was loaded with loopholes,

06:15just like the industry wanted.

06:18The result was a total disaster.

06:22Derivatives moved from the edge of the financial system

06:25to the center of it.

06:26The result was that a law so massively expanded

06:33the reach of the derivatives market

06:35and further integrated it into the core financial system.

06:40That bill helped set the stage for the 2008 financial crash.

06:47Congress came back after the meltdown

06:49and cleaned up the mess in Dodd-Frank.

06:51But that was long after 10 million people lost their homes

06:56and millions more people lost their jobs and their savings.

07:02In the last decade,

07:03we saw this story in another version

07:07and just barely avoided another disaster because of it.

07:12In 2018, Congress debated and enacted S-2155,

07:19the Bipartisan Economic Growth, Regulatory Relief,

07:23and Consumer Protection Act

07:24right here on the floor of the Senate.

07:27Republicans in the banking industry pushed that bill

07:30and a number of Democrats joined them as well.

07:34They voted to roll back critical post-2008 crisis reforms

07:39for some of the largest banks in the country.

07:43Five years later, just five years later,

07:46three of those newly deregulated banks failed.

07:51Those three failures were the second, third,

07:54and fourth largest failures among banks in American history.

08:00For a while, it looked like we might face a run

08:03on the whole banking system.

08:05Swift action by regulators to bail out uninsured depositors

08:10and a whole lot of luck

08:11are the only reasons we didn't face

08:14yet another financial meltdown just two years ago.

08:19And now, here we are back to do the same thing again.

08:24A financial meltdown triggered by crypto instability

08:27is not some alarmist fever dream.

08:31In fact, it nearly happened just a few years ago.

08:35Crypto markets abruptly lost $2 trillion,

08:39that's trillion with a T,

08:42after the collapse of several major crypto firms.

08:45In 2022, two of the largest stable coins

08:50failed to maintain their pegs.

08:53Now, luckily, these cryptocurrency markets

08:56were mostly separate from the rest of the financial system.

09:00So we avoided the mass economic destruction.

09:04That ends today if we enact this bill.

09:08The Genius Act folds stable coins

09:11directly into the traditional financial system

09:14while applying weaker safeguards

09:17than banks or investment companies must adhere to.

09:21Make no mistake,

09:23we are likely to see another financial crisis

09:26in the coming years,

09:27and we are virtually certain

09:29to see another set of wild swings

09:32in cryptocurrency values.

09:34And it will be the American people

09:37who will bear the costs

09:39of a massive financial crash

09:41facilitated by the stable coin market

09:44if Congress passes the Genius Act.

09:47Third problem,

09:50if this bill passes,

09:51it will mean easier access to money

09:55for terrorists and drug cartels.

09:58Even today,

09:59the crypto industry's own analysts

10:02are calling stable coins,

10:04quote,

10:05the new kingpin of illicit crypto activity.

10:10According to Chainalysis,

10:12a blockchain analytics firm,

10:13stable coins account for more than 60%

10:17of all illicit crypto transactions.

10:22There's a reason for this.

10:24These stable coins are an ideal payment system

10:27that works for cartels, terrorists,

10:31sanctions evaders,

10:32and human traffickers

10:33to finance crime.

10:36Unfortunately,

10:37the Genius Act

10:38massively expands the marketplace

10:41for stable coins

10:43while failing to address

10:45the basic national security risks

10:47posed by them.

10:49The bill fails to apply

10:51any money laundering safeguards

10:53to exchanges and intermediaries

10:56that facilitate the movement,

10:59obfuscation,

11:00and custody of stable coins.

11:03The bill includes glaring loopholes

11:06that would allow Tether,

11:08which has reportedly become

11:10the cryptocurrency of choice

11:12for illicit actors

11:14because of its alleged willingness

11:16to turn a blind eye

11:18to money laundering

11:20to now get access to U.S. markets.

11:23In fact,

11:24the bill text

11:25now contains

11:26a so-called

11:27decentralized finance loophole

11:30that allows Tether

11:32and other non-compliant stable coins

11:35to access U.S. markets

11:37without any constraints,

11:39a loophole

11:40that does not exist today

11:43and that didn't even exist

11:45in the bill

11:46until this past weekend.

11:49I don't want to see

11:50fentanyl traffickers

11:52or child pornographers

11:54or terrorists

11:55or countries

11:57that are trying to avoid sanctions

11:59all finance their operations

12:02with U.S.-backed stable coins.

12:04And I certainly

12:06don't want to see

12:07a major expansion

12:08of access to money

12:10by America's adversaries.

12:13But if we pass this bill

12:14in its current form,

12:16that is exactly

12:17where we are headed.

12:20Fourth problem.

12:22If this bill passes,

12:23it will allow

12:24Elon Musk

12:25and Mark Zuckerberg

12:27to issue their own money.

12:29The bill still permits

12:30big tech companies

12:32and other conglomerates

12:33to issue

12:34their own private currencies.

12:37Community banks

12:38have warned us

12:39that by creating

12:40a parallel,

12:43lightly regulated

12:44banking system,

12:45the stable coin market

12:47will drain deposits

12:48from our local

12:49community banks

12:51and from the communities

12:52they serve.

12:54There will be

12:54less funding available

12:56for small businesses

12:57and households

12:58all across the country.

12:59So, if this bill

13:01becomes law,

13:03Congress will be responsible

13:05if a handful of giants

13:07take control

13:08of our money

13:08and then access

13:10and abuse

13:11troves of valuable

13:13consumer spending data.

13:16We will be responsible

13:17if small businesses

13:19struggle to access credit

13:21and if more community banks

13:23disappear.

13:26Finally,

13:27if this bill passes,

13:29main street investors

13:30will be at greater risk

13:32of getting robbed

13:33and scammed.

13:35The bill jeopardizes

13:36the CFPB oversight

13:38and the suite

13:39of consumer protections

13:41that people enjoy

13:42when using their Venmo app

13:44or their bank account.

13:46If you get cheated

13:47using a stable coin,

13:49you may just be out of luck.

13:52Our constituents

13:53will be reaching out

13:54to our offices

13:55because they have

13:57fallen victim

13:58to a stable coin scam

13:59or have been saddled

14:01with junk fees

14:02when they redeem

14:02their stable coin

14:03only to discover

14:05that in many cases

14:06there will be no recourse.

14:10Congress should not choose

14:12to enable

14:13President Trump's

14:15egregious corruption.

14:17Congress should not fuel

14:19the next financial crash.

14:21Congress should not put

14:24consumers at risk

14:25for fraud

14:26or make it easier

14:28to engage

14:29in terrorist activities.

14:31It doesn't have

14:33to be this way.

14:34A bill

14:35that meaningfully

14:36strengthens

14:37oversight of the

14:38stable coin market

14:39is worth enacting.

14:41A bill

14:42that turbocharges

14:44the stable coin market

14:45while facilitating

14:47the President's

14:48corruption

14:49and undermining

14:51national security,

14:52financial stability,

14:53and consumer protection

14:55is worse

14:56than no bill

14:58at all.

15:00For these reasons,

15:01I urge my colleagues

15:03to vote no

15:04on the Genius Act.

15:07Madam President,

15:08I yield the floor.

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