Senator Elizabeth Warren questions Elon Musk about X Money

The Massachusetts Democrat has been critical of private companies, including non-bank entities, issuing their own dollar-pegged stablecoins.

US Senator Elizabeth Warren has asked Elon Musk for information on X Money, a payments feature that is expected to be integrated into the X social media platform in the near future.

Warren, who is a longtime critic of Musk and the cryptocurrency industry, wrote in a letter on Tuesday that X Money’s potential stablecoin and crypto integrations could pose risks to the financial system and US national security.She questioned whether the platform would also issue its own stablecoin, under a legal “carveout” in the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which allows private companies to issue their own stablecoins. 

Warren said X Money’s limited beta preview suggests it will offer 6% interest on deposits and partner with Cross River Bank, which was subject to enforcement action by the Federal Deposit Insurance Corporation (FDIC), a banking regulator. She said:

Warren’s letter could signal pushback from US lawmakers against private companies issuing stablecoins under the GENIUS stablecoin regulatory framework, which opens the door for the tech sector and non-banks to issue US dollar-pegged tokens.

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Warren asked whether potential X Money customers were aware that FDIC insurance would not protect them if the platform failed.

In March, FDIC Chair Travis Hill said that stablecoin user deposits are not protected by FDIC insurance under the GENIUS Act.

“The GENIUS Act makes clear that payment stablecoins are not ‘subject to deposit insurance’ or guaranteed by the US government,” Hill said.

However, the legislation did not expressly prohibit stablecoin deposits from receiving pass-through insurance, which extends FDIC insurance to each customer of an eligible financial institution up to $250,000 in the event of a company failure, he added.

Hill said that even though the GENIUS Act lacks a hard prohibition on stablecoin companies extending pass-through FDIC insurance to end users, allowing this would be “inconsistent” with the broader points of the regulatory framework.

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Source: CoinTelegraph