- Sen. Elizabeth Warren criticized high fees on the ethereum network during times of heightened trading volatility.
- “Small investors could easily get jammed and wiped out entirely,” she said in a Senate committee hearing Tuesday.
- Warren said outages on crypto exchanges last week could have hit people who don’t have the money to lose.
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Sen. Elizabeth Warren has criticized the high fees on ethereum’s network during heightened trading volatility, arguing they could substantially harm small investors.
Ethereum network fees can change rapidly, largely because the blockchain uses a blind auction system to set them. Users must put in bids to make sure their transaction to be processed and verified by miners. That means fees can soar when the network is busy.
“In the face of these high, unpredictable fees, small investors could easily get jammed and wiped out entirely,” Warren said in remarks to SEC Chairman Gary Gensler at the US Senate Banking Committee Hearing on Tuesday.
The senator’s comments were centred on the sell-off in cryptocurrency markets last week, the same day El Salvador made bitcoin legal tender. She put forward a scenario of wanting to buy a hypothetical token worth $100 at that time to illustrate her point about fees.
“The fee to swap between two crypto tokens on the ethereum network was more than $500, obviously way more than the $100 I was trying to trade in the first place,” she said.
The way fees were calculated on the ethereum network changed with the London upgrade, codenamed EIP-1559. But the aim wasn’t to necessarily make them cheaper – only to make them more predictable.
Warren, chair of the Senate’s banking committee, is one of many lawmakers concerned that a lack of centralized authorities in the crypto industry means small investors have almost no protection and could get badly burned.
She previously called on Treasury Secretary Janet Yellen to act, saying there was a need for a cohesive regulatory strategy to moderate the escalating risks that cryptocurrencies pose to the financial system.
During the sell-off, some of the biggest crypto exchanges faced outages, blocking customers from making withdrawals. That could have had an impact on people who don’t have money to lose, Warren said.
“Advocates say crypto markets are all about financial inclusion,” she said to Gensler. “But the people who are most economically vulnerable are the ones who are most likely to have to withdraw their money the fastest when the market drops. Does this sound like the path to financial inclusion to you?”
Gensler raised the pressure on crypto exchanges Tuesday, saying they need to register with the regulator because some of their tokens or products may be securities.
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