Warren Warns GENIUS Act Creates Fraud Risks with Crypto Mortgage Loophole

U.S. Senator Elizabeth Warren (D-Mass.) has raised significant concerns about the recently enacted GENIUS Act, warning that its regulatory framework leaves critical vulnerabilities unaddressed, potentially endangering consumers, financial stability, and national security. The legislation, which allows cryptocurrencies to be used as collateral for mortgages and eases oversight for digital asset firms, has drawn sharp criticism from Warren, who argues it prioritizes industry interests over public safety. “The bill riddled with loopholes creates a green light for fraud and exploitation,” Warren stated, emphasizing the lack of safeguards for everyday investors [1].

The GENIUS Act, formalized as “Global Energy and Nuclear Innovation for the United States,” marks a pivotal shift in federal cryptocurrency policy by enabling entities like Fannie Mae and Freddie Mac to consider crypto holdings as qualifying assets for mortgage risk assessments. The Federal Housing Finance Agency (FHFA), led by Trump’s housing chief, has already begun implementing these changes. Warren, however, warns that this could incentivize unregulated crypto exposure in the housing market, risking systemic instability. Critics argue the legislation legitimizes speculative practices while reducing oversight for crypto projects, a move that could exacerbate existing market vulnerabilities [2].

Warren’s critique extends to broader implications, including perceived conflicts of interest linked to the Trump administration. She accused the White House of becoming a “crypto cash machine,” noting the bill could enable Trump-associated crypto firms and tech giants to issue currencies with minimal scrutiny [4]. This criticism aligns with her broader skepticism of Trump-era regulatory policies, which she has previously labeled “bribery in plain sight” in the context of other deals [5].

Industry watchdogs have echoed Warren’s concerns, highlighting risks such as “debanking” practices—where banks abruptly close crypto-related accounts—potentially destabilizing small investors [6]. Additionally, Warren emphasized the act’s failure to address transparency gaps in valuing or regulating crypto assets, a point reiterated by multiple sources [1]. The rapid passage of the bill, despite limited bipartisan debate, has fueled suspicions of undue influence from crypto lobbying groups, with some describing Congress as having “surrendered to the onslaught of crypto political spending” [3].

The debate underscores a growing divide in U.S. crypto policy. Proponents argue the act fosters innovation, while critics stress the need for stricter consumer protections. “Congress is setting up a system where ordinary people bear the brunt of crypto failures,” Warren said, calling for a moratorium on further deregulation until comprehensive safeguards are in place [3]. The Federal Housing Finance Agency’s recent proposal to let Fannie and Freddie adopt crypto as collateral has already drawn scrutiny from Democratic lawmakers, with Warren pushing for investigations into potential consumer harm [2].

If implemented without revisions, the GENIUS Act could amplify existing crypto market vulnerabilities, leaving investors exposed to volatility and fraud. Warren’s stance reflects a broader skepticism of rapid deregulation in emerging technologies, emphasizing the tension between fostering innovation and protecting public interest. As regulatory scrutiny intensifies, the act’s long-term impact will depend on whether lawmakers and agencies heed these warnings or proceed with its current framework.

Sources:

[1] [Common Dreams](https://www.commondreams.org/tag/corruption)

[2] [AOL.com](https://www.aol.com/democrats-probing-trumps-housing-chief-140137482.html)

[3] [Common Dreams](https://www.commondreams.org/tag/corruption)

[4] [TechStory](https://techstory.in/trumps-white-house-accused-of-becoming-a-crypto-cash-machine-by-warren/)

[5] [Barchart.com](https://www.barchart.com/index.php/story/news/33631968/federal-regulators-approve-paramount-s-8-billion-deal-with-skydance-capping-months-of-turmoil)

[6] [Kulipa](https://www.kulipa.xyz/blog)