Regulatory Interview with Elizabeth Warren on PancakeSwap: a New Tactic to Pressure the Cryptocurrency Industry

Elizabeth Warren has raised a topic that will shape the regulatory debate within the American financial institution family. In a letter dated December 15th sent to Secretary of the Treasury Scott Bessent and Attorney General Pamela Bondi, she posed a series of questions regarding decentralized exchange platforms (DEX), specifically highlighting PancakeSwap as a starting point for a broader discussion on national security and cryptocurrency regulation.

Strategy through a specific target: why PancakeSwap?

The choice of PancakeSwap was not accidental. Warren focused on a platform that combines two things simultaneously: trustless value exchange and the potential risk of being exploited by sanctioned entities. In her statement, she referenced reports of PancakeSwap being used for money laundering related to cybercrimes involving North Korea.

However, the scope of the letter was broader. Warren pointed out that over 90% of USD1 transactions on PancakeSwap involve coins linked to the cryptocurrency business associated with the Trump family – World Liberty Financial (WLFI). This connection of national security with a potential conflict of interest created a political trap that is difficult for both the Treasury Department and the Department of Justice to escape.

Three questions to change the regulatory landscape

Warren did not limit herself to criticism. She formulated three specific questions whose answers should shape future legislation:

First – she asked agencies to describe in detail the threats to national security related to DEXs, including ways in which platforms could be used to bypass KYC (Know Your Customer) requirements.

Second – she demanded identification of gaps in legal and regulatory authority that could be closed to strengthen oversight of financial flows.

Third – she posed a procedural requirement: agencies must explain how they will prevent conflicts of interest related to business ties of the American political leadership family with the cryptocurrency industry. The deadline for responses is January 12, 2026.

Fundamental dispute: transparency versus security

Beneath the political theater lies a deep technical tension that the cryptocurrency industry has been trying to resolve for years. DEXs like PancakeSwap operate as decentralized networks of smart contracts, liquidity pools, and interfaces – not as traditional companies in a single building. This means that PancakeSwap cannot be “turned off” with a single switch, like freezing a bank account.

Warren emphasizes the argument that if a platform looks like a financial institution and acts like a financial institution, regulators should not accept “but it’s decentralized” as a get-out-of-jail-free card. Her position is politically pragmatic, although the industry has decentralized counterarguments.

DeFi is much more transparent than traditional finance – all flows are public and auditable in real-time. Most activity on DEXs is straightforward trading conducted by market participants. Additionally, the industry is experimenting with compliance tools around protocols, such as wallet verification and sanctions screening.

However, the tension remains unresolved: DeFi facilitates access for everyone but also makes value transfer easier without traditional banking procedures. This is not a lack of monitoring capability – it’s a structural difference in the oversight model.

Connection to suspended legislation: strategy through documentation

The timing of the letter is not accidental. In July, the House of Representatives passed a bill concerning the structure of the cryptocurrency market, aiming to establish federal frameworks and expand the CFTC’s supervisory role. However, legislation has stalled in the Senate, despite a softened stance toward cryptocurrencies in other parts of the administration.

Warren employs a “pressure as a process” tactic here. When legislation drags on, letters become tools for shaping narratives – creating documentation, forcing responses, and defining conditions under which senators can vote.

Together with Warren and Jack Reed’s November letter about World Liberty Financial, and the December letter about PancakeSwap, this forms a two-part argument: first about the threat posed by WLFI tokens and potential conflicts of interest, then about trading platforms that could serve as money laundering channels.

Two possible paths: narrow or broad regulation?

Warren’s campaign could lead to two distinct outcomes. One path involves narrowly defined obligations directed at interfaces, promoters, and recognizable intermediaries – assuming that code is not a financial client and liquidity pools cannot file suspicious transaction reports (SAR).

The other path involves broad, vague formulations that treat decentralization itself as suspicious. This could push activity offshore, encourage the emergence of hidden interfaces, and make it harder for American users to access the most liquid markets.

Regardless of the outcome, the letter is a tactic treating politics as infrastructure. When legislation stalls, documentation becomes a battleground. Warren is attempting to predefine discussion areas through specific questions and response deadlines before the final bill text goes to a full Senate vote.