Elizabeth Warren Says GENIUS Act Will Cost Americans Financially

TLDR

The GENIUS Act has been signed into law to regulate the issuance and trading of stablecoins.
Senator Elizabeth Warren has strongly criticized the act for being influenced by crypto industry lobbying.
Warren warned that the American public could face financial harm due to weak regulatory protections.
She compared the act to past legislation that contributed to the 2008 financial crisis.
Economics professor Sergi Basco echoed Warren’s concerns about the risk of bank runs from unstable digital assets.

Lawmakers approved the GENIUS Act earlier this month, setting legal standards for stablecoin issuance and trading across the United States. President Donald Trump signed the bill into law, marking a major shift in the regulation of crypto assets. However, Sen. Elizabeth Warren has issued strong criticism, warning that the public may face serious financial risks.

Stablecoin Regulation Sparks Concern Over Industry Influence

The GENIUS Act introduces clear legal definitions and trading rules for stablecoins while encouraging financial institutions to participate in digital asset markets. Banks and retail giants have shown increased interest in stablecoin development under the act’s protections and regulatory clarity. Despite this, Warren argues the act favors industry players and weakens public safeguards.

She believes crypto lobbying heavily influenced the legislation’s design, increasing the risk of biased policy outcomes. Warren also expressed concerns about rushed legislative processes that lack adequate oversight and public input. According to her, such decisions often reflect corporate interests rather than public welfare.

Warren compared current legislative dynamics to past regulatory failures that triggered financial instability. She referred to the 2008 financial crisis and the Commodity Futures Modernization Act of 2000. That act allowed unregulated derivatives, which later contributed to systemic financial failures and public losses.

GENIUS Act Creates Illusion of Safety

Warren emphasized the risk of repeating history if lawmakers continue to support industry-backed regulation without proper scrutiny. She recalled how weak oversight in the derivatives market helped trigger the global recession in 2008. That crisis resulted in widespread unemployment, home foreclosures, and federal bailouts.

The senator noted that the GENIUS Act could give stablecoins an illusion of full government backing. This perception may cause consumers to underestimate the risks associated with privately issued digital assets. She believes many Americans may place excessive trust in these financial products without understanding their underlying vulnerabilities.

Economics professor Sergi Basco supported some of Warren’s concerns in a recent op-ed, calling for stricter controls. He warned that even if assets like U.S. treasuries back stablecoins, risks still exist. Fluctuating asset values and limited regulatory protections could expose investors to unexpected losses during economic downturns.

Trump’s Crypto Policies Face Increased Scrutiny

Sen. Warren has also raised concerns about the broader direction of federal crypto policy under Trump’s leadership. She criticized his decision to dissolve the Justice Department’s crypto enforcement team and claimed that the former president pressured the SEC to ease oversight of digital assets.

These changes, she argued, could weaken the government’s ability to prevent fraud and misuse within the crypto industry. Warren accused Trump of aligning with wealthy crypto advocates to reduce accountability. She believes such actions could increase financial instability while benefiting a select group of influential individuals.

Additionally, Warren voiced opposition to tech billionaires entering the stablecoin space without strict consumer protections. She warned that companies led by figures like Elon Musk and Jeff Bezos could misuse user data. The senator fears large firms could dominate the market and reduce competition while exploiting customer information.

Critics Warn Stablecoins May Increase Systemic Risk

Supporters claim stablecoins promote innovation and reduce payment costs, but critics highlight the potential for instability and market manipulation. Without strong rules, stablecoin issuers may operate like unregulated banks, increasing the risk of sudden collapses. Experts fear these digital assets could trigger bank-run-like scenarios during periods of market stress.

Basco pointed to Silicon Valley Bank’s collapse in 2023 as evidence of how safe assets can still lead to liquidity issues. He noted that even when backed by treasuries, stablecoins may not withstand rapid withdrawals. Policymakers must evaluate these risks carefully before allowing widespread adoption.

Warren maintains that when government regulation aligns too closely with corporate interests, public trust and financial security suffer. She called for independent oversight, transparency, and stronger consumer protections.