Senator Elizabeth Warren has indicated that more regulation is required to avoid any possible systemic dangers.
She also wants Congress to respond to the rapid growth of cryptocurrencies and has encouraged US officials to do more with the market-policing instruments at their disposal.
“Right now, we don't have any police on the street to speak of,” Warren, a Democrat from Massachusetts, said on Bloomberg Television on Wednesday in an interview with David Westin.
“As long as it is an unregulated system, you may attract more people to defraud them, which is not what we want.”
Warren said that pump-and-dump operations, which are plainly unlawful for stocks, sometimes go unpunished for tokens due to a lack of industry regulation.
Her remarks follow Securities and Exchange Commission Chair Gary Gensler's vow this week to pursue more crypto enforcement proceedings, claiming that the market is riddled with manipulation and asserting that many tokens match the definition of securities that fall under existing U.S. regulations.
Warren also stated that increased regulation is necessary to avert any potential systemic dangers.
“The larger it becomes and the longer it remains outside the banking system something goes wrong, there is a run on crypto or somewhere in the economy, I don't want the American taxpayer to be relied upon to back this up.”
The senator went on to say that she sees benefits for the technology underlying digital tokens in terms of potentially offering financial services to “unbanked” individuals.
She believes cryptocurrency may be a solution for workers who do not have bank accounts and must presently pay significant fees to cash their paychecks.
The chairman of the Securities and Exchange Commission (SEC) called on Congress on Tuesday to grant the agency additional authority to properly oversee cryptocurrency trading, lending, and platforms, which he described as a "Wild West" rife with fraud and investor risk.
According to Gary Gensler, the crypto market includes many tokens that may be unregistered securities, leaving prices subject to manipulation and millions of investors vulnerable to dangers.
Gensler wants Congress to grant the Securities and Exchange Commission (SEC) additional authority to supervise Bitcoin exchanges. He also proposed more regulation of peer-to-peer decentralised finance (DeFi) websites.
According to him, DeFi enables lenders and borrowers to conduct cryptocurrency transactions without the need for traditional institutions.