Senator Elizabeth Warren, D-Mass., Holds a press conference outside of the Capitol on Tuesday, April 27, 2021 to reinstate the Universal Childcare and Early Education Act.

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Senator Elizabeth Warren called on Treasury Secretary Janet Yellen Tuesday to identify and address cryptocurrency risks and create a “comprehensive and coordinated” framework through which federal agencies can continuously regulate virtual coins.

Warren, a member of the Senate Banking Committee and longtime critic of the country’s largest banks, urged the Treasury Secretary to use her powers on the Financial Stability Oversight Council to create a more secure crypto market.

“The FSOC must act quickly to use its legal powers to address the risks of cryptocurrencies and regulate the market to ensure the safety and stability of consumers and our financial system,” the Massachusetts Democrat wrote in a letter to Yellen .

“As the demand for cryptocurrencies continues to grow and these assets become more embedded in our financial system, consumers, the environment and our financial system are exposed to increasing threats,” she added.

Warren named five risks posed by an under-regulated crypto market. In her words it is:

  • Exposure to hedge funds and other investment vehicles with no transparency
  • Risks for banks
  • Unique threats from stablecoins
  • Used in cyber attacks that can disrupt the financial system
  • Risks from decentralized financing

A Treasury Department spokesman did not immediately respond to CNBC’s request for comment.

Warren’s letter also came as she and other lawmakers held a hearing on the Senate Banking Committee entitled “Cryptocurrencies: What Are They Good For?”

Senators will grill Coin Center Executive Director Jerry Brito, Filecoin Foundation Chair Marta Belcher, and Angela Walch, a research fellow at University College London’s Center for Blockchain Technologies, during Tuesday’s hearing.

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“Cryptocurrencies and other digital assets present significant risks right now, and the risks they pose are increasing as they permeate the traditional financial system and more and more people are investing,” Walch told lawmakers in a written statement. Her Twitter bio advises readers “not to own crypto”.

Warren’s letter is the latest in a series of calls from Capitol Hill for tighter market regulation.

Perhaps the most prominent example came in February when lawmakers on both sides of the political aisle pecked executives at brokerage firm Robinhood, social media website Reddit, market maker Citadel Securities, and video game retailer GameStop about “gamifying” stock trading.

However, regulating crypto markets has proven to be a more difficult task given the sheer number of different assets as well as the novelty of the technology behind digital currencies. To date, it is unclear which body – the FSOC, the Securities and Exchange Commission, or Congress itself – will ultimately be responsible for the day-to-day oversight of crypto trading.

That’s probably why Warren addressed her letter to Yellen in her role at FSOC.

Established after the 2008 financial crisis, the FSOC is headed by the Treasury Secretary and brings together 10 state financial regulators, including the Federal Reserve, the Securities and Exchange Commission, and the Commodities Future Trading Commission.

The council’s role is to identify risks to the financial industry and coordinate a regulatory response between cabinet departments and other agencies, as no single regulator is responsible for overseeing and addressing global risks to financial stability.

The SEC, under the new leadership of Chairman Gary Gensler, is currently considering approving exchange-traded funds that track Bitcoin’s performance. Many investors say that given the recent rally in Bitcoin and the extensive amount of futures and other derivatives trading in the space, the decision cannot come soon enough.

So far, Gensler has said investor protection should apply to crypto exchanges, and the Federal Reserve is considering issuing central bank digital currency.

Republicans on the Senate Banking Committee, including ranking member Pat Toomey of Pennsylvania and Cynthia Lummis of Wyoming, argue that Congress should better understand the potential uses of cryptocurrencies while keeping illegal activity at bay.

Toomey and Lummis are investigating the value and possible uses of so-called stablecoins or digital currencies that are linked to national currencies such as the US dollar.

“It’s important to note that people have raised legitimate issues with cryptocurrencies,” Toomey said in prepared remarks on Tuesday morning. “But we shouldn’t lose sight of the enormous potential benefits that distributed ledger technology offers.”

“We should also keep in mind that private innovation has made most of these developments possible,” he added. “We shouldn’t suppress the concepts of individual entrepreneurship and empowerment that made this innovation possible.”

– CNBC’s Stephanie Dhue contributed to this article.