United States Senator Elizabeth Warren, a Massachusetts Democrat, has been openly critical of cryptocurrencies in the past. She has habitually called on the Securities and Exchange Commission (SEC) to regulate digital assets like Bitcoin and Ethereum.
However, in a recent turn of events, Warren has now started to advocate a Central Bank Digital Currency (CBDC). Given a total of 35 bills focusing on crypto have now been introduced to the US Congress and little outcry from crypto lobbyists, Warren may have realised that cryptocurrencies are here to stay. Although regulations may seem like a deterrent, for many investors regulation provides clarity that they are investing within the law and they provide some protection. Tally Greenberg, Head of Business Development at Allnodes, confirmed this in an interview with NextAdvisor: “Regulations will come up and they have to come up at some point, which would stabilise the market even further.”
That said, Warren is often seen as not practising what she preaches. She is an ex-devout Republican turned Democrat and reportedly has a net worth of $12 million – despite positioning herself as a champion of the working class. Therefore, some might say that her position on crypto is heavily influenced by what might advantage her politically. Her previous fights against crypto may largely be about her battle to establish herself within the Democrats after fifty years of voting Republican, knowing Democrats are more likely to push for regulations. In a letter to the Chair of the SEC, Harry Gensler, Warren shared apparent concerns about Bitcoins and altcoins impact on ordinary investors, and said: “the lack of common-sense regulations has left ordinary investors at the mercy of manipulators and fraudsters.” Concerns about how transparent cryptos are, however, may play second fiddle to political considerations.
However, the US payment system is undeniably slow. The outdated technology behind the Automatic Clearing House means processing transactions is considerably slower than other domestic payment systems. Warren is no doubt aware that calls for a change to the payment system are getting louder, and that many are being tempted by crypto.
In an interview with NBC, Warren said: “So a lot that banks do wrong, if you think, ‘We could improve that in a digital world,’ the answer is, “Sure you could.” But in that case, let’s do a central bank digital currency, it is time to move in that direction.”
Indeed, in 2021, after the first hearing on digital currencies, the Senator described cryptocurrencies as a “wild west, not a good way to buy and sell things, not a good investment and an environmental disaster.” That said, Bitcoin and CBDCs are not the same. For one, a CBDC is not a cryptocurrency as they are commonly understood: it is based on a country’s fiat currency, anonymity is not permitted, and it is regulated by a central authority, like a central bank. Further, the crypto transaction details are not available to the public, unlike those conducted on the blockchain. So although it may be peculiar to see Warren advocating for a cryptocurrency, given what she has previously said, CBDCs are controlled, regulated and dependent on the country’s fiat currency, which corresponds with what the Senator has been rallying for.
Tesla and SpaceX owner Elon Musk has frequently shown his support of cryptocurrencies, going as far as adding the hashtag Bitcoin to his Twitter Bio. He also said on the Clubhouse audio chat app: “I think Bitcoin is really on the verge of getting broad acceptance by conventional finance people”. In accordance with this, many crypto supporters have argued Bitcoin enables “ordinary people” to have more control over their economic fate.
Therefore, if Warren did want to dismantle the unfair banking system that consolidates wealth and power, many would argue she would be pro-Bitcoin. Of course, she is not immune to hypocrisy or inconsistency: her flights in private jets, despite being a climate activist, and her stock-piling of funds, despite calling herself progressive and for the everyday American, have previously led to mistrust.
One could argue Warren’s fight against Bitcoin and altcoins is largely about stopping taxes being paid through Bitcoin. After all, on a public blockchain, the public could see whose tax money is funding who (and indeed how much tax fellow citizens are paying).
Warren may not particularly welcome this: during her 2020 presidential campaign, Warren transferred $10 million in high-dollar contributions from her 2019 Senate campaign to her Presidential campaign, after vowing to shun high-dollar fundraising events. Had this been done on the blockchain, she would’ve been found out even earlier.
Arguably, the former Law professor who transitioned to politics to “fight corruption and change the rules of the economy,” has been laying the groundwork for CBDCs – and the central control that offers – since 2020. In an interview with CNBC, the Senator said cryptocurrencies, especially those issued by central banks, could give low-income Americans without bank accounts an introduction to the broader US financial system. The Senator also praised cryptocurrencies’ “extremely low transaction cost” which would make it a feasible exchange for those without a bank account.
However, it’s difficult to trust the idea that she is all for the working low-income American, when she denounces big money after pandering to big money. In 2018, up for re-election, Warren was flying all over America meeting private mega-funders who were all donating generously towards her campaign. It was only in early 2019 (after accumulating these funds) that Warren announced she was quitting the big money and would no longer be attending fundraising events. These examples of Warren’s contradictions, hypocrisies and self-interested U-turns have led to speculation as to what exactly she gains from advocating for a CBDC.
Despite her promotion, a CBDC would struggle to compete with Bitcoin and altcoins like Ethereum. This is evidenced by more and more elite actors and high net-worth individuals paying themselves in cryptocurrencies that already exist. Eric Adams, Mayor of New York, converted his first paycheck into two cryptocurrencies using CoinBase. Miami Mayor, Francis Suarez, has been a strong advocate of digital currencies at the 2022 Bitcoin Conference. Suarez envisions a “Bitcoin America” for 2024. Alongside paying himself in Bitcoin, Surez is actively encouraging businesses to accept it as payment and employees to be paid in it. Political momentum for existing digital assets seems to be growing.
Since the founding of the Congressional Blockchain Caucus, which aims to “study and understand the implications of blockchain technology,” it is evident the US government is attempting to influence the sector. Warren, known for changing her mind, is keen to be a part of this to retain her political status. The divide between anti-crypto and pro-crypto democratic politicians surrounding cryptocurrencies could delay the process of regulating cryptocurrencies. But how much influence does Warren have in this process?
Warren, who described Wall Street as having a “stranglehold on the US economy,” seems to have an influential voice in the Biden administration. Her growing presence and strength are evident through the amount of Warren allies on the government roster, most of which were senior figures leading Warren’s office overseeing Wall Street. To name but a few: Bharat Ramamurti is now Deputy Director of the White House National Economic Council, Julie Morgan is a senior adviser at the Education Department, Anne Reid, is Deputy Chief of Staff at the Department of Health and Human Services, and Sasha Baker is Senior Director of Strategic Planning at the National Security Council.
Warren’s strategically handpicked group in key positions will have a strong influence on policy. As she previously said: “Getting the right people in those slots is really important and it’s not only the top slots, it’s also the deputies and assistants. The people who do the hard work day in and day out to develop policies and then to execute them.” Little wonder that former Democratic Senate aide Karolina Arias commented that the new recruits: “confirm that Senator Warren will be the most influential voice in the financial policy debate under the new administration.”
However, Biden is no doubt aware that his victory in the 2020 Democrat primaries over both Bernie Sanders and Warren was influenced by the fact that they both proposed taxing financial trades. This policy divergence, and his decision to pass Warren over as Secretary of the Treasury, shows Biden is not necessarily going to follow Warren’s advice at all times. He may even seek to align himself more with Western allies such as Britain rather than pursue Warren’s route. In contrast to Warren’s bid to clamp down on stablecoins, the UK government announced moves “that will see stablecoins recognised as a valid form of payment” in a bid to make “Britain a global hub for cryptoasset technology and investment.”
Senator Warren’s history of being a Republican until she was fifty, stockpiling funds despite claiming to be a socialist, and turning on “big-money” after she’d made it herself, raises concerns. The actions throughout her political career suggest her decisions are driven mainly by what can serve her politically, rather than any underlying philosophy. Her final position on crypto will therefore depend on what she sees as being politically useful.
Author: Bronwen Latham