Simply put
- US Senator Elizabeth Warren urged the Treasury Department and the Federal Reserve not to “support” cryptocurrency companies and investors.
- Bitcoin has dropped roughly 50% since its peak last October.
- Treasury Secretary stated that the government lacks the authority to back Bitcoin with taxpayer money.
Sen. Elizabeth Warren (D-Mass.) has called on the Treasury and the Federal Reserve to ensure that taxpayer funds are not used to support Bitcoin or to bail out struggling cryptocurrency businesses. As prices continue to decline, there are growing concerns about the health of the crypto market.
In a letter addressed to Treasury Secretary Scott Bessent and Federal Reserve Chair Jerome Powell, Warren emphasized that government agencies should not allow taxpayers’ money to be transferred to wealthy crypto investors through direct purchases or other means of financial support.
This letter comes as scrutiny of the federal government’s role in the cryptocurrency sector rises. Both the Treasury and the Fed have the power to offer financial support under market stress, an authority used during various financial crises. “At this stage, it’s still unclear what, if any, plans exist for the U.S. government to intervene in the ongoing Bitcoin downturn,” Warren remarked.
With Bitcoin having dropped around 50% since its all-time high, Warren noted that this decline has been exacerbated by numerous liquidations of leveraged positions. The current economic climate has unsettled major investors linked to Bitcoin.
Currently, Bitcoin is trading at just under $67,000, down 0.4% for the day, according to CoinGecko. Prediction markets indicate there’s a 64% chance that Bitcoin could dip further to $55,000.
US digital assets
The conversation surrounding potential relief comes as policymakers explore broader acceptance of digital assets in the U.S. Since President Trump’s tenure began, various states have discussed creating strategic reserves of Bitcoin. Some lawmakers have even proposed allowing Bitcoin investments in specific public pension plans, while federal initiatives aim to further integrate cryptocurrencies into the financial system.
In her letter, Warren warned that any government intervention could disproportionately benefit the wealthiest investors, raising concerns over wealth shifts from taxpayers to affluent crypto participants. She cautioned that such a bailout would likely be unpopular and could financially benefit President Trump and his family due to his ties to the decentralized finance venture, World Liberty Financial.
Warren highlighted a recent transaction by World Liberty Financial, which sold approximately 173 wrapped Bitcoins to pay off $11.75 million in USDC. The Bitcoin price had dropped below $63,000, enabling it to avoid liquidation while taking on new debt. She also referenced significant losses reported by notable crypto investors as indicative of the market’s risks.
Warren’s skepticism towards cryptocurrency
Warren’s remarks are part of a broader critique she has consistently expressed about the crypto industry. On February 9th, she noted that the recent volatility underscores her ongoing concerns, stating, “It’s troubling to see Americans losing their hard-earned money.”
“The decline in cryptocurrencies demonstrates the urgent need for sensible consumer protections within this sector,” she added. “Without proper oversight, there’s a significant risk that wealthy insiders will protect their interests while imposing losses on smaller traders and retirees.”
During a recent hearing on February 4, Bessent responded to speculation concerning a Federal Bitcoin Reserve, affirming the government’s lack of legal authority to bail out Bitcoin using taxpayer funds.
When questioned about the possibility of using taxpayer money for crypto assets, Bessent confirmed that while the Treasury retains seized bitcoins, there’s no system in place to direct banks to purchase Bitcoin or utilize public funds to stabilize the market.
