Massachusetts Senator Elizabeth Warren did non hold dorsum in her criticism of decentralized finance (DeFi), expressing concern about how a run on stablecoins would affect the boilerplate investor.

In a Tuesday hearing with the Senate Cyberbanking Committee discussing stablecoins, Warren questioned Hilary Allen, a professor at the American University Washington College of Law, as to whether a run on stablecoins could potentially endanger the Us fiscal system. Though Allen said an "en masse" redemption of stablecoins from people who had lost faith in the tokens would be unlikely to take "systemic consequences" for traditional markets at nowadays, the DeFi system would exist more likely to experience the furnishings.

Warren countered that because stablecoins provided "the lifeblood of the DeFi ecosystem" outside of regulated markets, she believed their value would "take a nosedive precisely when people most need stability," with the impact affecting traditional finance.

"DeFi is the almost dangerous part of the crypto world," said Warren. "This is where the regulation is finer absent-minded, and — no surprise — information technology's where the scammers and the cheats and the swindlers mix among role-time investors and beginning-time crypto traders. In DeFi, someone tin't even tell if they're dealing with a terrorist."

Allen added that the potential threat Warren posited may be in DeFi's time to come, without addressing her claim about illicit transactions:

"I don't think DeFi can grow without stablecoins. I think information technology would struggle. Right now, I think DeFi is contained to the point where it won't affect financial stability, just if information technology grows, I think at that place's a real threat in that location, particularly if it becomes intertwined with our traditional fiscal system."

The discussion among U.S. lawmakers nowadays at the hearing — named "Stablecoins: How Do They Piece of work, How Are They Used, and What Are Their Risks?" — follows committee chair Sherrod Chocolate-brown requesting crypto firms release information related to consumer and investor protection on stablecoins. Allen appeared as a witness alongside Alexis Goldstein, director of financial policy at Open Markets; Jai Massari, partner at Davis Polk & Wardwell; and Dante Disparte, master strategy officer and head of global policy at Circumvolve.

Related: Regulators are coming for stablecoins, but what should they beginning with?

Warren has previously used hearings and public statements to merits cryptocurrencies are mainly tied to illegal activities. In a June hearing discussing cardinal banking concern digital currencies, the Massachusetts senator said the "crypto world currently has no consumer protection" and referred to many tokens equally "bogus" investments. She has also criticized the Ethereum network's loftier transaction fees during periods of price volatility.